Now, Where, How

Most business plans start in the wrong place. They open with a list of things the owner intends to do: a new website, more marketing, a hire, better systems. That is a list of Hows, written without an agreed Now and without a defined Where.

Which is why the list is usually the same list as last year, and why nobody can say whether it worked.

What the model is

Three questions, in a fixed order, and the order is the whole discipline.

Now. Where are you actually, in numbers you can evidence. Not how it feels. Turnover, margin, profit, cash, customer concentration, headcount, your own hours, whatever else genuinely describes the business.

Where. The destination, with a date on it and numbers attached. If it does not have a date and at least five numbers, it is a mood rather than a target.

How. The handful of moves that close the gap. Not everything you could do. The two or three things that, if they happened, would make the rest of the list mostly irrelevant.

Why it matters to an owner

Plans fail at Now far more often than they fail at How. An owner who believes gross margin is around 40 per cent when it is 33 will build a plan that cannot work, and will spend a year wondering why the effort is not showing up in the bank.

Where fails for a different reason: vagueness protects you. Grow the business, get better systems, take a step back are all statements nobody can be held to. The moment you write £2m by 31 December, gross margin 45 per cent, no customer over 20 per cent of revenue, you have made yourself accountable, and most owners avoid that instinctively rather than deliberately.

What a serious Now actually contains

Most owners can produce a turnover figure and a rough sense of profit. That is not a baseline, it is a headline. A Now worth planning from usually needs eight or nine numbers, and getting them takes an afternoon at most.

Turnover and gross margin by type of work, not just in total, because the average always hides the fact that one line is subsidising another. Overheads, split between what is genuinely fixed and what moves with volume. Net profit, with the owner properly paid, since a profit that only exists because you underpay yourself is not profit. Cash, and the position on tax and VAT. Customer concentration, expressed as the percentage of revenue from your top three. Capacity, meaning what the business could deliver at full stretch with the people it has today. And your own working hours, honestly counted, evenings included.

That last one belongs in the numbers rather than in the conversation. An owner working 55 hours who wants a £2m business needs to know that the plan requires the hours to fall while the revenue rises, which is a different plan from simply doing more of the same.

A worked example

Illustrative numbers, and the point is that the plan has to survive arithmetic before it survives enthusiasm.

Now. A specialist installer. Turnover £1.2m. Gross margin 38 per cent, so £456,000. Overheads £382,000. Net profit £74,000. Eight staff, owner working around 55 hours a week, and 62 per cent of revenue from three customers.

Where, three years out. Turnover £2m. Gross margin 45 per cent. Net profit £250,000. Owner at 35 hours. No customer above 20 per cent of revenue.

Now do the arithmetic before you write a single How. £2m at 45 per cent is £900,000 of gross profit. Overheads will not stay at £382,000: add an operations manager at £52,000 fully loaded, two more in delivery and admin at £64,000, premises and systems at £40,000, marketing at £45,000. That is £583,000 of overhead, leaving £317,000 of net profit. The target survives, with £67,000 of headroom for the costs nobody forecasts.

Then run it again at today's margin. £2m at 38 per cent is £760,000 of gross profit against the same £583,000 of overhead, which is £177,000 of net profit. Below target, after three years of hard growth.

That single comparison changes the plan. The margin move is worth more than the growth move, and it is cheaper and faster. So the Hows write themselves: pricing and job costing first, then the operations manager who protects margin at higher volume, then customer diversification. Three moves. Not eleven.

The mistake most owners make

They start at How, because How is the enjoyable part. Tactics feel like progress and they can be started on Monday. A year of energetic Hows pointed at an undefined Where produces a busy business that has not moved.

The second mistake is refreshing the plan without redoing Now. The destination gets rolled forward, the actions get rewritten, and the baseline is quietly assumed to be the same as last year. It is not. The whole value of the exercise is the gap between two honest numbers.

The third is treating Now as a criticism. Owners soften the baseline because it is a judgement on them personally, and then wonder why the plan built on it does not hold. A brutal Now is not an insult, it is the only starting point that gives the plan a chance.

How to apply it this week

1. Take one sheet of paper and rule three columns. Now, Where, How. If the plan does not fit on that page, it will not be remembered, let alone run.
2. Fill in Now from the accounts, not from memory. Six numbers: turnover, gross margin, overheads, net profit, cash, and your own hours. Look them up. Do not estimate them.
3. Write Where with a date and five numbers. Three years is usually the right horizon for the destination, with this year's twelve-month plan sitting inside it.
4. Test the arithmetic before you commit. Does the destination actually produce the profit you have written down once the extra overheads are in? Redo it at today's margin to see which lever the plan really depends on.
5. Choose three Hows and delete the rest. Each one gets a named owner and a first action with a date. Anything without both is a topic, not a plan.
6. Diarise the review now. Ninety days, one hour, three questions: did the Now numbers move, is Where still right, are the three Hows still the right three?

The questions to sit with

• Out of 10, how accurate do you believe your Now numbers are, and when did you last check rather than assume?
• Could a member of your team state the destination and its date without prompting? If not, it is your plan rather than the business's.
• Which of your current activities would you stop tomorrow if you were honest about whether it moves you towards Where?
• What would have to be true in three years for you to say the last three years were worth it?

This is the spine of Strategy & Destination and the 12-Month Plan. The order matters more than the format. Get Now honest, make Where specific, and the Hows stop being a wish list and start being a short list of decisions.