This article is part of our Business Planning Guide—a curated list of our articles that will help you with the planning process!

Today, I want to introduce a new approach to business planning: Lean Planning.

Lean Planning replaces lengthy business plans with a 20-minute planning process that focuses on increasing your chances of success in business. It focuses on taking small steps, reviewing your results, and creating incremental improvements—all while reducing your risk of failure.

Lean Planning is simpler and faster than writing a traditional business plan. And, it’s a better approach for starting and growing successful companies. Read on to learn how to create a Lean Business Plan and how to make the Lean Planning process work for you.

It’s time to fix the business plan

Let’s face facts: Writing a traditional business plan is a hassle.

• A traditional business plan takes too long to write.
• Most people won’t even read it from cover-to-cover.
• It’s often outdated by the time you finish writing it.
• It doesn’t lend itself to frequent and easy updating—and that’s the core of the problem.

Historically, entrepreneurs have taken months to craft detailed plans without even gathering feedback from potential customers. Entrepreneurs have viewed business planning as a single hurdle to get their business up and running or a thick wad of paper to shove across a banker’s desk in order to get the funding they need.

These business plans end up as just a collection of guesses and assumptions, instead of a proven roadmap for growth.

But, planning is still critical—that’s a fact backed by science

The business plan might be broken, but the planning process is still vital.

Not planning your business would be like taking off from an airport without a destination in mind, a planned route, or knowledge of how much fuel you might need to get where you want to go.

Planning enables you to figure out your focus and your priorities—in other words, your business strategy. It helps you determine what you’re going to do, and more importantly, what you’re not going to do. It creates a roadmap and helps you actually get things done.

However, you shouldn’t create a plan and follow it blindly. A good plan is one that you’re constantly adjusting and refining as you gather more information about your business and your customers.

Studies have shown that businesses that set goals and track their progress grow 30 percent faster than those who “just wing it.” Furthermore, even established businesses grow faster when they have a plan. For more, you can read my full roundup on the science of business planning here.

Clearly, planning is still essential. So, it’s time to fix the traditional business plan and replace it with a planning process that works.

Lean Planning is a faster and better business plan solution

Lean Planning is a 4-step process that helps you discover a business model that works and manage a company successfully.

Here’s the process:

1. Create a Lean Plan
2. Test the plan
3. Review your results
4. Revise your plan

I’ll go into more detail on each step in a moment.

If you’re a startup

Lean Planning helps you quickly figure out if your idea is any good and what you need to change to build a viable business.

If you’re an established business

Lean Planning works even if you’re already up and running. It helps you continually refine and tweak your strategy while measuring your progress toward your goals. After all, planning is about making better management decisions, not about producing a thick document that sits in a drawer.

Now, let’s dig into the actual Lean Planning process.

Step 1: Create a Lean Plan

The Lean Planning methodology starts with a one page Lean Plan that you can create in 20 minutes.

That’s right—one page. Lean Planning is a simple methodology and your Lean Plan should be simple, too. You can download a Lean Plan template and fill it in as you follow the steps below.

If you choose to build your Lean Plan in LivePlan, our business planning tool, it’s called a “Pitch” there, but it’s the exact same thing.

Your Lean Plan will include:

• Strategy: what you’re going to do
• Tactics: how you’re going to do it
• Business model: how you’re going to make money
• Schedule: who is doing what and when

Let’s dive into each step.

Your business strategy

Your business strategy is simply an overview of what you want to do and who your customers and competitors are. Start by identifying the problem you are solving for people and follow up by explaining your solution to this problem.

The problem you’re solving

Businesses exist to solve problems for customers. Their products and services fill a need or satiate a desire. If all you have is a solution that is in search of a problem, you’re going to have a hard time building a successful business. So, start with the other side of the equation and focus on how you can help your customers solve a problem.

Start small with just one or two sentences or a few bullet points to identify the problem you are solving. Do the same thing to describe your solution.

Your ideal customer

Now, quickly describe your target market. Who is your ideal customer? If you know how many potential customers are out there, great. If you’re in the early stages of fleshing out your business idea, don’t worry too much about detailed market research. Instead, focus on defining your ideal customer—who are they and what are their key attributes?

Your competition

Finally, create a shortlist of your competition. How do your potential customers solve their problems today?

That’s it. A business strategy doesn’t have to be complicated with Lean Planning. It’s just a few bullets points that describe the essence of your business: what you’re doing and who you’re doing it for.

Tactics

The next section of your Lean Plan is a short outline of your business tactics. This is just an outline of how you’re going to to make your strategy happen. You’ll be thinking about sales, marketing, the team you might need, and any partners or outside resources you’ll need to leverage.

Your sales strategy

Start by thinking through your sales strategy. Are you selling online or building a physical store? Maybe both? Or, perhaps your product will be sold in stores owned by other companies.

Your marketing strategy

Next comes your marketing strategy. How are you going to reach your customers? How do they find out that you exist and that you solve their problem?

Your team

If you need to build a team to grow your business, who are the key people that you’ll need to hire? If you’re an existing business, who are the critical employees that run the company and execute your strategy?

Key partners and resources

Finally, think about other businesses that you might need to work with to make your strategy happen. Are their key suppliers or distributors that you’ll need to have relationships with?

Remember, this is a Lean Plan, so each of these sections should just be three to five bullet points each.

Schedule

Now it’s time to build a schedule for your Lean Plan. Lean Planning is all about getting things done, so including a schedule is one of the most important things to include in your Lean Plan.

If you’re a startup

Your next step is to get out from behind your desk and go talk to your potential customers (I’ll go into more detail on this in a moment). Your goal will be to verify that you’ve defined a solid strategy. To that end, a startup’s schedule should include things like conducting customer interviews, sending out surveys, researching physical locations, interviewing potential suppliers, and so on.

If you’re an established business

Your schedule will probably be focused on specific business milestones that are related to executing your strategy and implementing your tactics.

It’s critical to have accountability here. Your schedule should have dates and people responsible for completing each task.

Finally, make sure to include a time to regularly review your Lean Plan. You’ll want to review and revise this plan frequently, so having a regular review point is critical. I recommend a monthly review cycle, but reviewing more frequently is fine, too.

Business model

Even if you have a problem that’s worth solving, a solid solution to the problem, and a target market that needs your solution, you don’t have a business unless the numbers work out. You need a business model that works. The last component of your Lean Plan is a basic forecast and budget to ensure that a great idea can actually lead to a great business.

Yes, forecasting and budgeting do mean looking into the future, and no one knows the future (at least I don’t!). But, it doesn’t have to be as difficult as it sounds.

Putting together some basic, bottom-up sales forecasts and a basic budget for expenses will quickly tell you if you have a business model that works—one that can create a viable business that will pay the bills.

At this stage, it’s important not to paint an incredibly rosy picture of your financial prospects. Instead, the sales forecasts should be as realistic as possible. Assume that not nearly as many people as you think will show up in your store. Assume that your website won’t get mainstream press coverage.

With this “realistic” forecast, do you still have a viable business? Can you turn a profit? If you can only be successful with incredibly high volumes of customers, you may need to take a second look at your pricing, expenses, and other aspects of your business model. Or, make sure that you get the kind of funding that’s needed for large marketing and PR campaigns.

You can get started on your Lean Plan right away by downloading our free template. Your Lean Plan will fit on one page and you’ll be able to complete an initial draft in under an hour—that’s much faster than writing a traditional business plan!

Step 2: Test the plan

Now that you have your Lean Plan in hand (just one page, remember?), you’re ready to start putting the plan into action to see if your ideas will work.

Depending on your business stage, you’ll do this in different ways. If you’re a startup with an unproven idea or an existing business that’s considering a new strategic direction, your next step is to validate the ideas in your Lean Plan.

Your Lean Plan is just a set of assumptions about a business. Ask yourself:

• Do the target customers actually have the problem that you think they have?
• Does the solution you’re proposing actually solve their problem?
• Do your target customers want to pay for your solution? How much?

Reducing risk is your goal in the early stages of starting a business

Starting a business is full of risks. There are just so many unknowns, and it’s incredibly risky to just build your business based on a set of assumptions about your target market, their problems, and how they’ll react to your solution.

Your Lean Plan is a really just a set of educated guesses that need to be answered and then revised on a continuous basis until most unknowns are removed. That’s how you reduce risk.

So, you need to take the very simple, but very challenging step of actually talking to your potential customers.

Look at your first version of your Lean Plan as a set of assumptions that need to be proven true or false and then go back and revise your assumptions as you go. Refining your plan so that it’s a collection of facts instead of guesses can be the difference between a successful business and a failure.

If you’re already up and running, focus on implementation

For more mature businesses that already know a lot about their target customers, the goal of the plan is to help guide implementation. In this situation, use a Lean Plan to get everyone on the same page, set goals, and manage the business.

Step 3: Review your results

Both Silicon Valley startups and Main Street small businesses need to know how they are doing. Are they growing according to plan? Why or why not? If not, what changes need to be made? Should the plan change?

For new startups

If you’re just getting started and don’t have many (or any) metrics to track yet, you should be reviewing the results of your customer interviews and any other information that you’ve gathered that would change your strategy. Perhaps you’ll be refining your solution or even tweaking the definition of the problem you are solving. Perhaps you’ll refine your marketing and sales strategy.

For established businesses

Beyond tracking key financial metrics such as cash, sales, expenses, accounts receivable, and accounts payable, businesses must track the other key metrics that are critical to their success. These other key metrics might be website visits, foot traffic in the store, tables turned in a restaurant, or any other core number that drives business success.

Reviewing your results regularly is key to better management and success. These metrics should be reviewed at least monthly in a regular plan review meeting with key business partners and employees. This is when you refine your plan and your pitch if necessary and track your ongoing action plan.

Step 4: Revise your plan

Lean Planning is a process, not just a document. It’s is all about continuous improvement. You’re quickly defining a strategy, experimenting to see if that strategy works, reviewing the results, and revising the plan before you start again.

Lean Planning is never finished. It’s simply a process for running your business better, more efficiently, and setting you and your team up for success.

What if you need a more detailed business plan?

There may be a time when you need a more detailed business plan. There’s nothing wrong with that. Some people might want to read it and you might even want to document your strategy in more detail.

Your detailed business plan will be born from your Lean Plan. The ideas in your Lean Plan will transfer from bulleted lists to sentences and paragraphs. You’ll add more detail to your sales and marketing strategy, your pricing strategy, and perhaps your manufacturing plans and distribution strategy.

For a step-by-step guide to creating a detailed business plan, check out our guide.

Lean Planning templates and tools

To support Lean Planning, we built LivePlan. It’s a planning tool that helps you build a one-page Lean Plan, collaborate with business partners, and build solid financial forecasts. When you’re up and running, you can easily track your progress against your goals just by connecting your accounting software to LivePlan. It’ll do all the hard work of crunching the numbers and give you the reports you need.

Of course, you can also do all of this on your own if you’d prefer. We have all the templates and tools you need to do it yourself—all for free. We also put together a list of our best Lean Planning resources all in one place.