Operating Plans The Ultimate Guide in 2023

Each year businesses go thru the annual process of budgeting and planning for the next financial year. Smart businesses take this planning process as an opportunity to delve deeper into the business, to better align the operating plan to business delivery. With extensive experience delivering operating plans, the team at Black Belt Consulting have put together Operating Plans The Ultimate Guide in 2023.

What is an operating plan? An operating plan is a detailed plan, covering sales, marketing, human resources and operations that provides a roadmap for the following financial year. It is different to a strategic plan, as in most instances it is focused on next year, rather than the longer term view a strategic plan offers. It can be delivered independently across business units, but always rolls up to one business wide operating plan.

The operating plan will align to the strategy of the business, but will offer the “nuts and bolts” of how the strategy will be delivered next year.

So who should be involved in the operating planning process? As the operating plan covers all facets of a business, so stakeholder engagement across these facets must be considered in the plan. The operating plan will fail if delivered in isolation or not including the areas of the business that will impact the business goals and delivery.

The operating plan should not be a finance function! They may manage the process, but it should be a contribution from all functions of the business, across all business units.

What a successful operating plan looks like!

The operating plan needs to provide clear metrics to the business. This will enable tactical and broader changes to the business, should the need arise. Many operating plans deliver a high level sales number and profit, but more detailed metrics needs to be detailed. The operating plan should provide an understanding of what will be sold and by who, how it will be delivered, the marketing success required to see these sales.

As important as a concise operating plan is, the ability to measure the progress of the business against the plan is paramount. Just measuring sales only goes part ways to understanding the progress of the business. Focus need to be instilled in the delivery of the tools and reports that measure all facets of the business to truly understand success.

What is the difference between an operating plan and a strategic plan?

An operating plan is focused on the next financial year and is more detailed in its outlook. Strategic and operating plans share many similar attributes. A strategic plan is a plan that may look several years into the future. It is broader focused, with an emphasis on where the business will be in the next few years. Strategic plans tend to be more long-term focused, covering a period of three to five years, providing a roadmap for the future of a business.

Where do you start with your operating plan?

It all starts with what you are going to sell! Regardless of whether you are a service or product based business, the first step in creating an operating plan is gathering data, in particular sales data. The sales data that is required is focused on two key areas:-

1. Sales – What is sold? – product or service
2. Customer – Who is buying, and what are they buying?

Sales data is looking at what product of service has been sold in the past. An understanding of the specific product or service, how many were sold is needed. Many businesses experience seasonality in their sales and this needs to be identified and included in your plan. The use of historical sales data is crucial as it helps to paint a picture of where the business is coming from, identify trends and enablers that can help to increase sales. It would be advantageous if your business can easily measure sales, but for many businesses, work needs to be done to provide or find this data.

Where are the sales coming from – the Customers?

Many small businesses can put together sales data, and in most cases, have an understanding of what they are selling.

Where operating plans tend to fall short is a detailed understanding of what customers are buying what products or services. This vital understanding of your customers is required. It enables the business to identify like customers, which will facilitate better marketing. Further, it enables the business to identify upsell opportunities for more products or services to those existing customers.

We then need to dig a bit deeper! It is great to develop an understanding of when customers are buying and how those customers are buying?

• Are they buying, online or in store?
• How often are they buying?
• What else are they buying?
• Are they a repeat purchaser, do they come back?

The adage that 80% of your sales comes from 20% of your customers is often true! If, as a business, you can detail sales per customer, you are on the first step to operating planning glory!

What we want to detail is the sales by customers. This can also include the channels those customers are coming from. We want to know what the historical sales are as they can be a great indicator of future sales.

Further, the opportunity to interview customers would provide invaluable information for your operating plan. So what do we want to know from customers? We are looking to explore not just their engagement with your business, but broadly what their pain points are and why they are buying from you

• How long they have been customers?
• What is their experience in purchasing from your business?
• How would they describe their satisfaction with your business?
• Do they buy elsewhere and why?

These are a small set of customer questions. The key to interviewing customers comes from the ability to expand and pivot on these questions to delve deeper into their engagement with your business.

Customers provide an invaluable insight into your business! Yet they are seldom engaged as part of the operating planning process.

Operating Plan Nexus

The final forecast for operating plans tends to end up somewhere between what the CEO/business owner wants, what the sales team think they can deliver, and what the market is expecting (normally closer to what the CEO wants!). There can be a dis-connect between expectations and what can be delivered to grow the business. One of the key deliverables for an effective operating plan is what we refer to as the “The Operating Plan Nexus”. This is the nexus between the expectation of the CEO, a realistic sales forecast and what the market is saying!

The CEO – What he/she wants?

The role of the CEO/business owner is to oversee and drive the business forward. They have oversight of the growth strategy of the business and have ultimate accountability for results. They would always be looking to grow the business and focused on results. The operating plan needs to be aligned to the more broader strategic objectives of the business.

Think of the operating plan as a step on the road to deliver the strategic agenda. The CEO would want measurable results. If you can measure the business to plan, you can take action to improve and grow. The CEO would use the operating plan to set KPI’s, and to make the business accountable for results.

Sales Team – What can they deliver?

We don’t wan to focus solely on the sales team, but they are the cornerstone to an operating plan. In many instances, the sales team may be incentivised on sales outcomes and a lower expectation that can be reached more easily can sometimes (not always) be presented. This is where more than numbers are needed to support the sales team. From the management of the sales team(s), we need to understand their sales strategy. This includes how they measure the performance of the sales team. From the sales manager we want to know what the obstacles to selling and increasing sales are?

Sales Team – BDM’s

Many businesses have sales teams that includes Business Development Managers (BDM’s). The BDM’s are the frontline to sales and offer a view of sales and customers worth understanding. From the BDM’s, we want to know how they go about their sales. Are they responding to leads, do the create their own leads, what are their impediments to sell. An understanding of what success looks like to a BDM helps to build a view of sales that can be replicated.

Sales Team – Frontline

From the sales team, including the call centre, we want to understand customer interactions and the sales process. We are not looking for process improvements, although this may be a result of the interviews. We want to know what the sales team knows about customers – from the frontline.

• The way they approach the sales
• What are they hearing from customers?
• How do they prioritise sales?
• How they interact with other parts of the business?

The Market –  What is going on outside the business?

The delivery of an effective operating plan includes and understanding of what is going on in the market. There are two facets to this understanding.

1. The first is the broader economy.
2. The second is the industry your business operates in.

We need to take a macro view of the country. Is inflation and spending affecting the business. Where in the economic cycle is the country currently in. Are we experiencing a period of growth, or are we entering a more difficult economic cycle. In particular, we are wanting to know what the key challenges to the economy is at the moment and how that might impact the business.

In 2023, as we enter a period of high inflation, many businesses are finding a challenging environment with reduced spending by consumers and businesses. Understanding this can enable steps to deliver business success.

The Industry – What is going on in your industry?

Industries can perform differently depending on the broader market. Where your business and the industry sits needs to be understood.

There are also industry specific events and cycles that need consideration. What is the competition within the industry doing? Is the industry being disrupted by technology or innovation. How hard is it for new entrants to come in and upset the “status quo”. What is going on in your industry can be detailed as part of the stakeholder engagement process as your team, depending on their role, would have a different view of the industry.

Technology – How will it impact your business?

A review of technology and its impact on your business and your industry tends to fall under the strategic plan banner. This is because a lot of technology and disruption can be on your business radar but not impacting the business as yet. With technology and an operating plan, we need to have the mechanisms to make changes or pivot in the instance of an unforeseen impact from technology.

The Strategic Plan –  What part of the strategic plan will be delivered this year?

The operating plan nexus needs to consider the want of the CEO, the delivery by the sales team and what is going on in the market. These factors would also be detailed as part of the strategic plan (typically 3 to 5 year plan). This years operating plan needs to incorporate those longer term initiatives that will be implemented this year. A need to extrapolate from the strategic plan this years actions is part of the delivery.

How does your business deliver an operating plan?

We have detailed the requirement to collect historical sales and product/service data that will help to inform future sales. One of the key requirements to deliver an operating plan is engaging stakeholders. Engaging stakeholders is an essential part of delivering an operation plan as it enables an alignment of goals for the successful delivery. It moves past just Excel and draws a deeper understanding of what needs to get done!

So, this is the part of operational planning that moves from excel to softer engagement skills. The first step is to identify the stakeholders. We detailed the operating plan nexus included the CEO and  sales team alignment, but the inclusion of a broader group of stakeholders is imperative to success.

Stakeholder engagement – the key to operating plans

The General Manager or Sales Manager is part of the sales stakeholder group, but the inclusion of team leads and frontline sales staff provides an invaluable, first-hand understanding of business growth.

A preliminary stakeholder engagement should include an understanding of their engagement with customers.

Where operating plans are let down is the lack of stakeholder and customer engagement. There is often a numbers led operating plan, but a deeper dive by interviewing stakeholders across the business is imperative to deliver the operating plan.

Although the delivery of spreadsheets called operating plans is often what is presented, we recommend explorative interviews to understand, validate and help detail how success can be achieved.

Interviews – the key to operating plans

Interviews across the business, and across different functions of the business, provide a perspective on that cannot always be detailed at a senior level. A deep-dive into team understanding of what goals are, customer pain points and objections, how sales are changing, the challenges faced selling the product or service can be understand with an external focus.

What is seldom done is interviewing customers! The team at Black Belt Consulting recommends a process that includes interviewing customers, partners, suppliers. This is not exhaustive, and an understanding of external parties that engage with your business needs to be considered.

What do we want to understand from external parties?

• What is the experience or interaction with your business?
• What do they think of the products or services provided? – Price, service, delivery, features

How do you engage external stakeholders?

One-on-one interviews with external stakeholders can be hard to organise and slow to action. There exists great online tools that can help this process. These can include:-

• Mentimeter: Which enables you to build presentations, interactive polls and quizzes
• Mural: interactive whiteboard that supports collaboration
• Miro: collaboration tool that is a very smart whiteboard

These online tools mean you can “outbound” to a larger number of external stakeholders. These tool provides greater flexibility to stakeholders, enabling a higher response rate. They also work well internally!

So when is the right time to deliver an operating plan?

Many businesses start the process to deliver an operating plan prior to the new financial year. An operating plan can be looked at as a rolling action plan for your business. Developing your operating plan can be done at anytime during the year. This is because a good operating plan includes measurements that enable you to understand how the business is performing. Creating an operating plan early can enable you to get a head start on the financial year.

Why engage external support to deliver your operating plan?

The delivery of an effective operating plan is critical for any business, laying the framework for achieving and measuring business results. Many businesses struggle with the day-to-day of business as usual, or lack the resources or skills to develop an operating plan. The introduction of dedicated support to develop an operating plan should be considered and the reasons are:

An outsiders perspective: it can be hard for internal teams to step back and look at the business objectively. An external consultant brings an un-emotional attachment to the business and can better take an holistic view of the business.

Time and resources: To build an operating plan can require significant resources. Time can be hard to find when business is focused on the day-to-day. The support of an external consultant can better deliver a plan, without having an additional burden placed on the team.

Experience and expertise: Bringing knowledge and a deep understanding of the successful process to deliver operating plans. The ability to bring a fresh and new thinking to the business and support from experts who have done it before, will deliver an effective operation plan.

Ongoing support and accountability: A consultant engaged to deliver an operating plan is accountable for the delivery. They are available for ongoing support to ensure the successful measurement and alignment of the operating plan. They can help monitor the progress of the business against the plan, identify any deviations from the operating plan, and recommend actions to keep the business on track if needed.

Operating Plan Audits

If you have taken the hard yards and developed your operating plan, it is worth considering engaging external support to audit the operating plan. An external consultant brings a fresh and objective perspective to the operating plan detailing the strengths, weaknesses, and areas for improvement. This detail of the operating plan is crucial for a thorough and accurate assessment of the plan’s effectiveness.

Engaging an external consultant for an audit of the operating plan brings a level of credibility and validation to the operating planning process. The independent assessment provides assurance to stakeholders the business has taken proactive measures to ensure the plan’s reliability and viability.

Operating Plans – The Final Word

An operating plan is a critical tool for businesses to ensure that they are effectively implementing their strategic plans and achieving their growth aspirations. It details a clear roadmap for how to execute on a business strategy, turn ideas into action and set targets to achieve business success.

Looking for the support of a dedicated consultant to help the delivery of an operating plan can provide significant benefits. From experience, an objective perspective and minimising the time on teams, a consultant will deliver an effective operating plan.

Black Belt Consulting has extensive experience in building effective operating plans. We can take the burden of building your operating plan out of the business. Our practical business management experience ensures operating plans are commercial and effectual.

Contact the team at Black Belt Consulting today.