Category Archives: Lean Planning with LivePlan

Do Your Lean Plan With LivePlan

I hate selling disguised as information. Most of this website and all of the main edition of my new book Lean Business Planning (coming soon) is about business planning without regard to software. It’s software neutral. Planning is planning, and so is lean business planning. The tools don’t matter. It’s about the end result. liveplan-ad

However, I also love LivePlan, published by Palo Alto Software, my company. I’m conceptual author, and I have a financial interest; so I’m very biased. Yes. LivePlan is far-and-away my favorite tool for working with lean business planning. It builds correct financials from your guided assumptions, so you do have projected cash flow, almost automatically. So too, your three essential projections, plus milestones, scheduling, and everything else you need to do your original lean business plan. And – better still – you can connect it to your accounting to get the automatic management features to make the entire plan-run-review-revise process of lean business planning real.

To bring those two contradictory thoughts together, I’ve added more than a dozen LivePlan-Specific sections to this site. Each of them replaces one of the generic sections. So the book still stands on its own for anybody, but I’ve added these additional sections for the convenience of LivePlan users. They are:


The LivePlan Pitch Summarizes Strategy

LivePlan Specific VersionSince this is a first step towards a lean business plan, here’s a reminder: The lean business plan is for internal use only. Don’t sweat the text. Just do bullets. And in LivePlan, you have an ideal tool for a strategy summary.

Using the LivePlan pitch page

The LivePlan tool starts with a simple statement of problem and solution, and then adds a streamlined summary of market. Together, combined with the implicit identity in the choice of problem and solution, this is an excellent strategy summary. It’s more than enough for a lean plan.

Sample 1: For a small business social media consultant:

The LivePlan pitch summarizes strategy for Have Presence. The identity is the owner’s interest in and facility with social media. The market and product offering are defined in bullet points.
Have Presence Strategy Summary

The LivePlan pitch summarizes strategy for Have Presence. The identity is the owner’s interest in and facility with social media. The market and product offering are defined in bullet points.

Although this may be enough, I find the IMO strategy summary is useful for me. It helps me keep track of the fundamental generators of traffic. In the lean business plan, although the pitch is a good visual summary, it also keeps track of IMO strategy generators. Notice in the following three illustrations how the LivePlan standard outline was modified to accommodate the lean business plan:

LivePlan Sample IMO Strategy


Sample 2: For a bicycle retailer

The LivePlan pitch summarizes the bike shop strategy. The owner’s identity is implied, and the market and product offering appear in bullet points and a simple chart.

LivePlan Strategy Summary

The three illustrations here show the strategy summaries for each of the three fundamentals.

Sample Identity in Liveplan

LivePlan Summary Market

LivePlan Sample Strategy Offering

Sample Tactics in LivePlan

LivePlan Specific VersionSample Tactics for a Social Media Service

Let’s look at tactics for Have Presence, the social media service whose strategy was a model for the lean plan strategy section. Notice that the tactics are simple: reminders for management, things to track later with specific dates and deadlines and tracking results. They are added to topics selected from the outline in LivePlan, and  this plan modifies the LivePlan outline (an easy-to-use feature of LivePlan) to adopt the preferred lean business plan structure.

Marketing and Sales Tactics

LivePlan Sample Marketing Tactics

Product Tactics

LivePlan Sample Offering Tactics

Financial/Admin Tactics

LivePlan Sample Admin Tactics

Sample Tactics for Bicycle Store

Sales and Marketing Tactics

LivePlan Sample Marketing Tactics

Product Tactics

LivePlan Sample Product Tactics

Tactics in a Lean Plan are Simple Lists

You see in these examples that listing tactics in a lean business plan is a long way from the “elaborate business plan” you may need later. Don’t worry about text, editing, and descriptions. Just use bullet points to remind yourself and your team what the plan is.

Step 3 Concrete Specifics with LivePlan

A good business plan is nine parts execution for every one part strategy.

– Tim Berry

LivePlan Specific VersionThis is my favorite part of business planning. This is the real plan, what’s actually going to happen. It includes these four elements:

Review Schedule. Make sure you schedule monthly plan review sessions in advance.

Identify and List Assumptions. When assumptions change, the plan should change. If you don’t list your assumptions then you don’t know.

Milestones. Specific activities, responsibilities, tasks, dates, deadlines, and budgets.

Metrics. Specific performance metrics that can be measured, tracked, and managed.

Review Schedule for LivePlan Users

Calendar date book

LivePlan Specific VersionThe most important single component of a real business plan is a review schedule. This sets the plan into the context of management. It makes it clear to everybody involved (even if that’s just you) that the plan is going to be reviewed and revised regularly. All the people charged with executing a business plan have to know when the plan will be reviewed, and by whom. This makes it clear that the plan will be a live management tool, not something to be put away on a shelf and forgotten.

For example, in Palo Alto Software, we established the third Thursday of every month as the “plan review meeting” day. In the old days, we brought in lunch and took over the conference room. It wasn’t a big deal. We were done in 90 minutes. But we scheduled all the meetings as part of the next year’s plan, and key team members knew they should attend, and wanted to be there. Absences happened, but only when they were unavoidable.

If your planning process includes a good plan — with specific responsibilities assigned, managers committed, budgets, dates, and measurability — then the review meetings become easier to manage and attend.  The agenda of each meeting should be predetermined by the milestones coming due soon, and milestones recently due.  Managers review and discuss plan vs. actual results, explaining and analyzing the differences.

Even if it’s just you in your business, you should still do a monthly review. We all benefit from the discipline of a scheduled time to take a step back from the day to day, review progress, analyze results, and make changes. That’s called management.

LivePlan includes an ideal scheduling tool for planning and scheduling the monthly reviews. The illustration here shows some of the detail from the bicycle shop sample lean plan:

LivePlan Schedule Reviews


For each item on the list, LivePlan lets you add details including not just date, but who’s responsible, plus notes, as shown in this next illustration:


LivePlan Review Detail

List Your Assumptions in LivePlan

list of assumptions

liveplan-specific-versionIdentifying assumptions is extremely important for getting real business benefits from your business planning. Planning is about managing change, and in today’s world, change happens fast. Assumptions solve the dilemma about managing consistency over time, without banging your head against a brick wall.

Assumptions might be different for each company. There is no set list. What’s best is to think about those assumptions as you build your twin action plans.

If you can, highlight product-related and marketing-related assumptions. Keep them in separate groups or separate lists.

The key here is to be able to identify and distinguish, later (during your regular reviews and revisions), between changed assumptions and the difference between planned and actual performance. You don’t truly build accountability into a planning process until you have a good list of assumptions that might change.

Some of these assumptions go into a table, with numbers, if you want. For example, you might have a table with interest rates if you’re paying off debt, or tax rates, and so on.

Many assumptions deserve special attention. Maybe in bullet points. Maybe in slides. Maybe just a simple list. Keep them on top of your mind, where they’ll come up quickly at review meetings.

Maybe you’re assuming starting dates of one project or another, and these affect other projects. Contingencies pile up. Maybe you’re assuming product release, or seeking a liquor license, or finding a location, or winning the dealership, or choosing a partner, or finding the missing link on the team.

Maybe you’re assuming some technology coming on line at a certain time. You’re probably assuming some factors in your sales forecast, or your expense budget; if they change, note it, and deal with them as changed assumptions. You may be assuming something about competition. How long do you have before the competition does something unexpected? Do you have that on your assumptions list?

You can use your LivePlan to add a simple list of assumptions as part of your lean business plan. The illustration here shows the assumptions list for the bicycle shop lean business plan:

LivePlan Sample Assumptions

Manage Milestones with LivePlan

liveplan-specific-versionThere’s no real plan without milestones. Milestones are what you use to manage responsibilities, track results, and review and revise. And without tracking and review, there is no management, and no accountability.

With LivePlan, you can use the scheduling feature in LivePlan to develop your milestones and manage them with tracking and email reminders. In the illustration for the bicycle store lean plan review schedule (reproduced here below for convenience) you can also see milestones including a top 10 customer list, spring promotion, and social media setup. LivePlan mixes the review schedule and milestones together.


Just as you need tactics to execute strategy, so too you need milestones to execute tactics. Normally you’ll look for a close match between tactics and milestones.

And you might also have budgets, start dates, and additional information for major milestones. Then make sure all your people know that you will be following the plan, tracking the milestones, and analyzing the plan-vs.-actual results. If you don’t follow up, your plan will not be implemented.

Your milestones list and categorize what’s supposed to happen for ongoing tactics related to products, services, marketing, and sales. They include launch dates, review dates, prototype availabilities, advertising, social media, website development, programs to generate leads and traffic. The milestones set the plan tactics into practical, concrete terms, with real budgets, deadlines, and management responsibilities. They are the building blocks of strategy and tactics. And they are essential to your ongoing plan-vs.-actual management and analysis, which is what turns your planning into management.

And you develop your milestones by thinking through strategy, tactics and actions for business offering and marketing. So you can naturally divide them into the same categories as your tactics: marketing and sales, product, and other (where “other” might be, as with tactics, financing activities like raising investment or contracting commercial credit). Or the milestones might be related to legal issues, or managing a team, or logistics like moving or opening a new location.

Set Performance Metrics in Liveplan


Developing performance metrics is a critical part of developing accountability as one of the principles of lean planning:

Lean business planning sets clear expectations and then follows up on results. It compares results with expectations. People on a team are held accountable only if management actually does the work of tracking results and communicating them, after the fact, to those responsible.

business plan metrics

metrics for business planning

“Metrics” is my favorite word for performance measurements that you track as part of your regular planning process. They are numbers people can see and compare. Make them explicit as part of your lean plan. Show them to the management team as part of the planning and then show the results again and again during your monthly review meeting. Management often boils down to setting clear expectations and then following up on results. Those expectations are the metrics.

The most obvious metrics are in the financial reports: sales, cost of sales, expenses, and so on. Most people in business understand how assigning specific responsibility for those financial numbers, and managing those numbers closely, builds accountability in a business. Those are classic performance metrics.

However, with good lean planning, you can look for metrics throughout the business, aside from what shows up in the financial reports. For example, marketing is traditionally accountable for levels of expenses in the financials, but also generates metrics on websites, social media, emails, conversions, visits, leads, seminars, advertisements, media placements, and so on. Sales is traditionally responsible for the sales reports in the financials, but there are also calls, visits, presentations, proposals, store traffic, price promotions, and so on. Customer service has calls, problems resolved, and other measures. Finance and accounting have metrics including collection days, payment days, and inventory turnover. Business is full of numbers to manage and track performance. When metrics are built into a plan, and shared with the management team, they generate more accountability and more management.

The illustration here shows the simple metrics for the bicycle store sample lean plan:

LivePlan Performance Metrics

Developing the metrics required to bring your people into the planning process is very important. Involve the team in deciding what metrics to use. The people in charge often fail to realize how well the players on the team know their specific functions, and how they should be measured. And the people executing want explicit objective numbers they can track themselves.

Of course the starting expectation numbers alone aren’t enough. For real accountability, management revisits those numbers regularly, to track progress and make people accountable for results. This is a critical part of planning as steering the business and planning as management.

How to Forecast Sales with LivePlan

LivePlan Specific VersionLivePlan is set up to manage your sales forecast for you: you do the assumptions and the software does the calculations correctly and formats for presentation in tables and charts. LivePlan helps you get the assumptions in place and guides you through the process with prompts and explanations.

Yes, you can manage your sales forecast assumptions. Don’t think you need to have an MBA degree or be a CPA. Don’t think it’s about sophisticated financial models or spreadsheets. I was a vice president of a market research firm for several years, doing expensive forecasts, and I saw many times that there’s nothing better than the educated guess of somebody who knows the business well. All those sophisticated techniques depend on data from the past. And the past, by itself, isn’t the best predictor of the future. You are. So let’s look at how to forecast sales, step by step.

Your sales forecast won’t accurately predict the future. We know that from the start. What you want is to lay out the sales drivers and interdependencies, to connect the dots, so that as you review plan vs. actual results every month, you can easily make course corrections.

If you think sales forecasting is hard, try running a business without a forecast. That’s much harder.

Your sales forecast is also the backbone of your business plan. People measure a business and its growth by sales, and your sales forecast sets the standard for expenses, profits and growth. The sales forecast is almost always going to be the first set of numbers you’ll track for plan vs. actual use, even if you do no other numbers.

If nothing else, just forecast your sales, track plan vs. actual results, and make corrections; that’s already business planning.

Sales Forecast Step 1: Set Your Categories

Plan how many categories of revenue you have. Look for the right level of detail. Forecasting, even though it often results in tables that look like accounting reports, doesn’t work in too much detail. For example, a restaurant ought not to forecast sales for each item on the menu, but for breakfasts, lunches, dinners, and drinks. And a bookstore ought not to forecast sales by book, and not even by topic or author, but rather hard cover, soft cover, magazines, and maybe main sections (such as fiction, non-fiction, travel, etc.) if that works. For example, the bicycle retail store doesn’t forecast by each type of bike, or part, or item of clothing. It summarizes by the product lines as shown in the illustration that follows here:

Selecting Rows of Sales

LivePlan guides you through this process. You name your category and then forecast as shown below. First, though, I recommend defining all the categories.

LivePlan gives you the option of forecasting amounts per month or forecasting units and average prices per item. I strongly recommend the forecast by units, which is what I show here. Projecting unit sales and unit prices gives you more information to work with later, when you evaluate actual results compared to plan. You’ll be able to determine to what extent the difference between plan and actual is the result of a difference in units, or a difference in price.

At first glance, service businesses don’t sell units. However, attorneys and accountants bill by the hour, taxi drivers charge by the trip, and so forth. Try to think of your sales in units. If you can’t, then don’t; but you still need a sales forecast.

The illustration here below shows how LivePlan gives you a choice of forecasting by units or not. The options include revenue only, unit sales, or recurring charges (such as a monthly subscription). It’s your choice. I recommend unit sales and that’s what I use for the bicycle store examples in this book.

LivePlan Select Forecasting Model

Step 2: Estimate Units

After you choose to forecast by units, LivePlan guides you through entering the units for each of the next 12 months, plus annually for the second and third years.

LivePlan Unit Sales

But how do you know what numbers to put into your sales forecast? The math may be simple, yes, but this is predicting the future; and humans don’t do that well. Don’t try to guess the future accurately for months in advance. Instead, aim for making clear assumptions and understanding what drives sales, such as web traffic and conversions, in one example, or the direct sales pipeline and leads, in another. And you review results every month, and revise your forecast. Your educated guesses become more accurate over time.

Timing of sales

Your sales are supposed to refer to when the ownership changes hands (for products) or when the service is performed (for services). It isn’t a sale when it is ordered, or promised, or even when it’s contracted. With proper accrual accounting, it is a sale even if it hasn’t been paid for. With so-called cash-based accounting, by the way, it isn’t a sale until it’s paid for. Accrual is better because it gives you a more accurate picture, unless you’re very small and do all your business, both buying and selling, with cash only. I know that seems simple, but it’s surprising how many people decide to do something different. And the penalty of doing things differently is that then you don’t match the standard, and the bankers, analysts, and investors can’t tell what you meant.

Use experience and past results

Experience in the field is a huge advantage. In the example above, Garrett the bike store owner has ample experience with past sales. He doesn’t know accounting or technical forecasting, but he knows his bicycle store and the bicycle business. He’s aware of changes in the market, and his own store’s promotions, and other factors that business owners know. He’s comfortable making educated guesses. In following example, the café startup entrepreneur makes guesses based on her experience as an employee.

Use past results as a guide. Use results from the recent past if your business has them. Start a forecast by putting last year’s numbers into next year’s forecast, and then focus on what might be different this year from next. Do you have new opportunities that will make sales grow? New marketing activities, promotions? Then increase the forecast. New competition, and new problems? Nobody wants to forecast decreasing sales, but if that’s likely, you need to deal with it by cutting costs or changing your focus.

Yes you can forecast a new business or new product

What? You say you can’t forecast because your business or product is new? Join the club. Lots of people start new businesses, or new groups or divisions or products or territories within existing businesses, and can’t turn to existing data to forecast the future.

Think of the weather experts doing a 10-day forecast. Of course they don’t know the future, but they have some relevant information and they have some experience in the field. They look at weather drivers such as high and low pressure areas, wind directions, cloud formations, storms gathering elsewhere. They consider past experience, so they know how these same factors have generally behaved in the past. And they make educated guesses. When they project a high of 85 and low of 55 tomorrow, those are educated guesses.

You do the same thing with your new business or new product forecast that the experts do with the weather. You can get what data is available on factors that drive your sales, equivalent to air pressure and wind speeds and cloud formations. For example:

  • To forecast sales for a new restaurant (there’s a detailed example in a following section), first draw a map of tables and chairs and then estimate how many meals per mealtime at capacity, and in the beginning. It’s not a random number; it’s a matter of how many people come in. So a restaurant that seats 36 people at a time might assume it can sell a maximum of 50 lunches when it is absolutely jammed, with some people eating early and some late for their lunch hours. And maybe that’s just 20 lunches per day the first month, then 25 the second month, and so on. Apply some reasonable assumption to a month, and you have some idea.
  • To forecast sales for a new mobile app, you might get data from the Apple and Android mobile app stores about average downloads for different apps. And a good web search might reveal some anecdotal evidence, blog posts and news stories perhaps, about the ramp-up of existing apps that were successful. Get those numbers and think about how your case might be different. And maybe you drive downloads with a website, so you can predict traffic on your website from past experience and then assume a percentage of web visitors who will download the app.

So you take the information related to what I’m calling sales drivers, and apply common sense to it, human judgment, and then make your educated guesses. As more information becomes available — like the first month’s sales, for example – you add that into the mix, and revise or not, depending on how well it matches your expectations. It’s not a one-time forecast that you have to live with as the months go by. It’s all part of the lean planning process.

Sales forecast depends on product/service and marketing

Never think of your sales forecast in a vacuum. It flows from the strategic action plans with their assumptions, milestones and metrics. Your marketing milestones affect your sales. Your business offering milestones affect your sales. When you change milestones — and you will, because all business plans change — you should change your sales forecast to match.

Step 3: Estimate Average Prices

The next step is a simple estimate of average unit prices. This is planning, not accounting, so keep it simple. You’re working with averages, summary, and aggregation. In this bicycle store example, the average price of a bicycle is $500. That’s one number to summarize all bicycle transactions. You’ll be able to adjust over time. This example uses one average price for the entire forecast. LivePlan does allow you, as an option, to have varying prices over time. The bicycle store doesn’t need that.

LivePlan Unit Price

Step 4: Estimate Average Direct Costs

Now estimate direct costs, also called COGS, or cost of goods sold, or unit costs. These are costs that the business incurs only in delivering what it sells. In a bicycle shop, it’s what is paid for the bicycles, accessories, clothes, and parts that it sells. For a bookstore, it’s what the store paid for the books it sells. For a taxi business, it’s the gasoline and routine maintenance. Direct costs are useful for comparison basis.

LivePlan gives you some obvious choices for how to estimate those direct costs. In this bicycle store example, the owner chooses 69 percent for direct costs.

LivePlan Direct Costs


When in doubt, LivePlan can help you with these estimates. It includes a database of benchmarks that offer industry standards for key numbers. For example, the illustration below shows benchmarks for sporting goods retail, which is roughly what applies to the bicycle store.

Fill in All the Assumptions and You Have a Sales Forecast

LivePlan guides you through these assumptions for each of your rows of sales, and from there generates a complete sales forecast as shown here for the sample company.

LivePlan Sales Forecast

LivePlan Sales Chart

LivePlan Reality Check

Although we don’t discuss Gross Margin until Chapter 17 on Profit and Loss, LivePlan includes a reality check on Gross Margin that can help you with your sales forecast. Gross Margin is sales less direct costs. By the time Garrett finished his LivePlan sales forecast shown above, LivePlan was already calculating the Gross Margin for him – in this case it’s 43%.


And as Garrett does that, he can turn to the LivePlan built-in benchmarks to see where his estimates fall:

Sporting Goods Sample Benchmarks



Sample Sales Forecast for a Restaurant in LivePlan

LivePlan Specific VersionMagda is developing a lean plan for a café she wants to open in an office park. She wants a small locale, just six tables of four. She wants to serve coffee and lunches.  She hasn’t contracted the locale yet, but she has a good idea of where she wants to locate it and what size she wants, so she wants to estimate realistic sales. She assumes a certain size and location and develops a base forecast to get started.

Establishing a base case

She starts with understanding her capacity. She does some simple math. She estimates that with six tables of four people each, she can do only about 24 sit-down lunches in an average day, because lunch is just a single hour. And then she adds to-go lunches, which she estimates will be about double the table lunches, so 48 per day. She estimates lunch beverages as .9 beverages for every lunch at the tables, and only .5 beverages for every to-go lunch. Then she calculates the coffee capacity as a maximum of one customer every two minutes, or 30 customers per hour; and she estimates how she expects the flow during the morning hours, with a maximum 30 coffees during the 8-9 a.m. hour. She also estimates some coffees at lunch, based on 3 coffees for every 10 lunches. You can see the results here, as a quick worksheet for calculations.

Where do those estimates come from? How does Magda know? Ideally, she knows because she has experience. She’s familiar with the café business as a former worker, owner, or close connection. Or perhaps she has a partner, spouse, friend, or even a consultant who can make educated guesses. And it helps to break the estimates down into smaller pieces, as you can see Magda has done here.

And, by the way, there is a lesson here about estimating and educated guesses: Magda calculates 97.2 coffees per day. That’s really 100. Always round your educated guesses. Exact numbers give a false sense of certainty.

She then estimates monthly capacity. Look at the above illustration and you’ll see that she estimates 22 workdays per month, and multiplies coffees, lunches, and beverages, to generate the estimated unit numbers for a baseline sample month.

So that means the base case is about 1,500 lunches, about 1,000 beverages, and about 2,000 coffees in a month. Before she takes the next step, Magda adds up some numbers to see whether she should just abandon her idea. At $10 per lunch and $2 per coffee or beverage, that’s roughly $15,000 in lunches, $2,000 in lunch beverages, and $4,000 in coffees in a month. She probably calls that $20,000 as a rough estimate of a true full capacity. She could figure on a few thousand in rent, a few thousand in salaries, and then decide that she should continue planning, from the quick view, like it could be a viable business. (And that, by the way, in a single paragraph, is a break-even analysis.)

From base case to sales forecast

With those rough numbers established as capacity, and some logic for what drives sales, and how the new business might gear up, Magda then does a quick calculation of how she might realistically expect sales to go, compared to capacity, during her first year:

Estimating monthly sales

Month-by-month estimates for the first year

Month-by-month estimates for the first year

Turning to LivePlan, we input the row definitions, unit sales estimates, average prices, and average direct costs to create the complete sales forecast. The first illustration here shows the input for the row definitions. This is based on Magda’s calculations above, with an additional row added for “other,” which is t-shirts and mugs and such.

LivePlan Deli Sales Rows

And this illustration shows the data input for unit sales of lunches, one of the four rows of sales:

LivePlan Sales Units Deli

Important: these are all just rough numbers, for general calculations. There is nothing exact about these estimates. Don’t be fooled by how exact they appear.

Notice how she’s working with educated guessing. She isn’t turning to some magic information source to find out what her sales will be. She doesn’t assume there is some magic “right answer.” She isn’t using quadratic equations and she doesn’t need an advanced degree in calculus. She does need to have some sense of what to realistically expect. Ideally she’s worked in a restaurant or knows somebody who has, so she has some reasonable information to draw on.

Estimating direct costs

Along with sales, it’s advisable to estimate direct costs, also called COGS, or cost of goods sold, or unit costs. These are costs that the business incurs only in delivering what it sells. In Magda’s case, it’s what she pays for the coffee beans, beverages, bread, meat, potatoes, and other ingredients in the food she serves. For a bookstore, it’s what the book paid for the books it sells. For a taxi business, it’s the gasoline and routine maintenance. Direct costs are useful for comparison basis.

So, with her unit sales estimates already there, Magda needs only add estimated direct costs per unit to finish the forecast. The math is as simple as it was for the sales, multiplying units times per-unit direct cost. Then it adds the rows and the columns appropriately. Here’s the finished example showing sales and direct costs in LivePlan  (with just the leftmost columns showing for visibility’s sake):


Here again you see the idea of educated guessing, estimates, and summary. Magda doesn’t break down all the possibilities for lunches into details, differentiating the steak sandwich from the veggie sandwich, and everything in between; that level of detail is unmanageable in a forecast. She estimates the overall average direct cost. Coffees cost an average of 40 cents per coffee, and lunches about $5.00. She estimates because she’s familiar with the business. And if she weren’t familiar with the business, she’d find a partner who is, or do a lot more research.