Do I change my business plan and targets to become more relevant?

Dear Aunty,

I’m confused as to when/how we update the plan based on real outcomes.

For instance, if we miss our target in month one, do we downgrade our forecast/target for the year or push on with increasingly difficult targets? (Same question applies if we exceed expectations.)

We want something that actually remains relevant throughout the year, but we’d also like to see how we’re tracking compared to our original forecasts.

Confused

Dear Confused,

Yes, I know we all like to stay relevant. So we miss our first quarter targets and it looks like our second quarter targets are also out of reach. Why don’t we fix this by changing the targets? Except that is a cop out. You had good reason to set those targets. So what you need to do is sit down and work out how you are going to do it. What has been the weakness? Not enough sales staff, wrong pricing, strategy hasn’t worked? Not enough market demand? Not enough promotion? Sales staff need more training? Being behind budget should put your business on steroids!

I would advise you to keep working towards your original budget for the financial year. If you absolutely have to change it, present your reforecast budget to the board and then make sure you have a line on your P&L that includes reforecast budget and original budget. That way you don’t lose focus on your original goals.

I assume the budget is for one financial year. Its aim is to keep us focussed on achieving our goals. Yes, we feel better when we are achieving budget and so it is always tempting to reforecast the budget to make that happen. But I personally think you should only reforecast to understand the worst-case scenario.

If you are in the fortunate position of exceeding budget, then introduce some stretch targets and get staff to aim for those so that they still drive the business as hard as possible. This means they will do even better!

Good luck!
Your Aunty B

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