What Is Backward Planning?

Answer

Backward planning starts with a five-year goal and works down to three years, one year, six months, and this month. Each level must be measurable and have one owner, so the five-year dream ends in a step you can take this week.

Most owners plan forward. They look at today and guess at next year. That is how a business ends up with a big five-year dream and a blank calendar for this month. Backward planning flips it. You decide where you are going first, then build the road back to where you stand.

From the Fabled Forest

Doctor Owl sits at a shoeshine stand beside his old classmate Franklin Talon, who is buying a share of a client's spa expansion with a Friday deadline. Franklin always finished the test first and never checked his answers. Doctor Owl spends the morning helping the spa owner do the opposite: start at five years, and check every answer on the way down.

How Do I Make a Five-Year Plan for My Business?

Run it through Organize, Plan, Grow. Expansion feels like a fire when money comes with a deadline. It is almost always a foundation decision.

  1. 1

    Take the Readiness Test

    Answer five yes or no questions on paper: profit in each of the last 12 months, the business can run a month without you, someone is ready to run the new piece, the business could survive a losing first year, and you have evidence new customers want it.

  2. 2

    Write the five-year goal at the top

    Bigger is optional. Plenty of owners want a better business at the same size.

  3. 3

    Work down four levels

    Three years, one year, six months, this month. Each line gets a measurable result and one owner's name.

  4. 4

    Turn every no into a step

    Each no on the Readiness Test becomes a line somewhere on the plan.

  5. 5

    Do this month's step

    Then check the plan every month and retake the Readiness Test every six months.

What Does a Backward Plan Look Like?

Here is a backward plan for the owner of a busy hair salon who wants a better business, not a second one:

WhenGoalMeasurable resultWho
Five yearsOne salon, profitable, run by a managerOwner works four days a weekOwner
Three yearsThe salon runs without the ownerOne full month away with no callsOwner and manager
One yearA manager in placeSenior stylist managing five days a weekSenior stylist
Six monthsThe foundation builtOperations file done; two months of expenses savedOwner
This monthThe first stepSenior stylist asked; first summary page written; savings account openedOwner

Now do the savings math on the six-month line. Say monthly expenses run $12,000. Two months saved is $12,000 x 2 = $24,000. Spread over six months, that is $24,000 / 6 = $4,000 a month into savings. If the salon cannot free up $4,000 a month, the plan just told you something important before you signed anything.

Read the plan top down to see the destination. Read it bottom up to see what happens this week. This week: ask the senior stylist to coffee after close on Tuesday.

Dr. Paul's Insight

Expansion plans are some of the most common plans Dr. Paul is hired to write. Before he writes one, he asks three questions. Why now? What happens to the business you have while you build the next one? What is the smallest version you could test first? Owners who can answer all three usually have a plan worth writing. Owners who cannot are often running from problems at the first location, and a second location gets every one of them, plus a commute.

How Do I Turn Annual Goals Into Monthly Goals?

Take the one-year line and split it into twelve monthly results, each with a name beside it. A one-year goal of "senior stylist managing five days a week" breaks into months: one day of managing in month two, two days in month four, and so on. Each month's result should be something you can check off, not a feeling.

Succession is a goal worth planning backward from. Dr. Paul covers it in who takes over your Sun City Center business.

Pair this with SMART goals so each monthly step is specific and measurable, then review it at a set time every month. If the business expands, ask the owner what "ready" looks like for you, and work toward it on purpose.

What Are the Steps of Strategic Planning?

Most textbooks teach strategic planning as mission, analysis, goals, strategy, implementation, and review. Backward planning is a practical way to run the goals and implementation steps: set the long-range goal, then decompose it into shorter time frames until the first action is clear. It pairs naturally with the planning function of management.

Owners from Melbourne to Port St. Lucie who want a bigger business in five years can start from that goal and work back. Dr. Paul covers it with Space Coast and Treasure Coast owners.

Does planning actually help small firms? A meta-analysis by Brinckmann, Grichnik, and Kapsa found business planning is generally good for performance, with the size of the benefit depending on the situation, including how new the firm is. People also tend to underestimate how long their own projects will take, which is why honest six-month and one-year steps matter.

Sources: Brinckmann, Grichnik, and Kapsa, Journal of Business Venturing, 2010. Buehler, Griffin, and Ross, "Exploring the Planning Fallacy," Journal of Personality and Social Psychology, 1994.

Startup Sioux Falls runs CO.STARTERS cohorts, mentors and pitch nights, a useful outside check for founders working backward from a big goal. Dr. Paul adds the numbers on Dr. Paul's South Dakota page.

Am I Ready to Expand My Business?

Take the Readiness Test before you take anyone's money. If you score fewer than five yeses, your plan just got its first steps. The expansion fire is number 10 in the guide to the 14 most common small business problems. When the plan is ready to show a lender, see how Dr. Paul's business plan writing tutorials walk through each section.

Terms like Backward Plan, Readiness Test, and Planning Fallacy are defined in the glossary.

What Else Do Owners Ask About Backward Planning?

Does my five-year goal have to be growth?
No. A five-year goal can be a better business at the same size: more profit, fewer hours, a manager in place. The method works the same way.
How detailed should each level be?
One goal, one measurable result, and one owner per level. The closer the level is to today, the more specific it gets.
What if someone offers me expansion money with a short deadline?
Read every page and run the numbers before the deadline, not after. If the deadline leaves no time for that, the deadline is telling you something.
How often should I update a backward plan?
Check this month's step every month. Retake the Readiness Test and adjust the higher levels every six months.

Grow from the ground you have, not the ground you dream of.

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Written by Dr. Paul Borosky, DBA, MBA, business consultant, strategic planner, and business plan writer with 14+ years and 1,000+ businesses served.

This page is for general educational purposes only. It is not legal, financial, or other professional advice.