What is dynamic planning and how can it help my business?
If you don’t know where you are going, you could end up anywhere. Dynamic planning helps you take charge and steer your business toward profitability and away from danger.
A dynamic strategic plan allows you to seize opportunities as they occur and plan for uncertain scenarios.
Here’s how dynamic planning can help your small business.
What is dynamic strategic planning?
Dynamic strategic planning is a subspecialty of financial planning and analysis that focuses on short-term strategies influenced by ever-changing market conditions, while still following the big vision of your company.
The main goal of dynamic planning is maximizing profitability in an ever-changing world based on real-time feedback. Here at Profit Frog, we help small business owners model profitability and develop a dynamic business strategy across a variety of potential scenarios. This is dynamic planning at its finest.
Want to see how our dynamic planning and modeling software works? Sign up for a free trial today!
How do you create a dynamic plan?
When creating a dynamic plan, you should focus on two major components: dynamic strategy and dynamic elasticity.
Dynamic strategy allows you to plan for long-term goals. However, unlike traditional planning, which is mainly static, dynamic planning recognizes that things can change fast. Dynamic plans allow you to recognize potentially profitable changes and respond quickly and efficiently.
Dynamic elasticity is what allows you to change your plans as needed. When it comes to dynamic planning, short-term strategy is not set in stone. Elasticity helps you in the process of reallocating resources based on market needs, while still maintaining a long-term goal in mind.
4 steps of dynamic planning
Here are the four steps of dynamic planning you should follow for an effective business strategy. Note that Profit Frog’s intuitive interface helps you automate and simplify every step of the dynamic planning process.
1. Establish your vision
Set clear goals for your business. Having big-picture goals will ground your dynamic plan, as you and your team will know exactly where to focus their attention. Everything you do will be in the context of meeting this ultimate goal.
2. Focus on your day-to-day requirements
Identify the tactics and the daily requirements needed to achieve your ultimate goal. What habits, systems, and processes do you need to adopt? Dynamic planning is a marathon, not a sprint, and the things you do every day help you take advantage of profitable opportunities in the future.
3. Review your financial performance and results
Does your budget reflect changing and growing needs? Review your financial performance regularly and adjust your budget by reallocating resources to meet these shifts and opportunities. Using small business forecasting software like Profit Frog can give you a clear view based on real-time information.
4. Adjust your plan as needed
A dynamic strategic plan allows for continuous improvement and lets you respond quickly and seize opportunities as they happen, but only if you adjust the plan as needed. Review your plan, analyze real-time feedback, and change it as needed. Continue doing what works while allowing for enough room for experimentation.
Dynamic planning and response: an example
The theory behind dynamic planning and response can be confusing. So, let’s look at a practical example—how Peloton used dynamic strategic planning to their advantage:
On September 11, 2020, CNN reported on the unexpected success of the fitness brand during the COVID-19 pandemic. Sales skyrocketed by 172%.
People stayed home, lived their lives, and worked in the house. They needed to exercise. Not only did the brand have home equipment they could use, but it also had a strong brand community that helped with the loneliness customers felt due to the sudden decline in social activities.
Through dynamic planning, they were well prepared and able to respond quickly. A spike in demand and supply shortages were challenging, but they worked hard to create a flexible plan that embraced these changes.
They offered free subscriptions to their service for months, encouraging people to join the community. They cut the price of their most in-demand bike by 15% and added a higher-value product release. Then they planned to include a new, lower-priced product.
If they were not ready to jump on the opportunity, they would have missed it. But they were still on a roller coaster of change. A short scene from a Sex and the City revival derailed their sales when one of their characters died after exercising on a Peloton bike.
The stock value went down because of this problem, and Peloton had a PR crisis. So, again, they implemented dynamic planning. They hired actor Ryan Reynolds to star in a commercial.
The commercial went viral and gave the brand a much-needed boost. This quick thinking was only possible by analyzing the situation through dynamic planning and shifting resource allocation appropriately.
What are the benefits of dynamic planning?
Dynamic strategy plans allow you to make changes quickly, efficiently, and with risk management in mind. Some of the most significant benefits of an effective dynamic planning process include:
- it helps you set clear goals and stick to them without rigidity
- it helps you pivot when your plan and goals are no longer appropriate to new conditions
- it speeds up your decision-making processes
- it provides relevant information for better decision making
- it allows for continuous improvement based on relevant data sets and real-time feedback
- it aids in risk management and allows you to recognize low-risk, profitable opportunities
- it helps you respond quickly and seize opportunities as soon as you recognize them
- it helps you recognize when to make scary, but necessary changes to your business strategy (such as cost reductions and reallocating resources)
- it increases accountability among your employees
Applying dynamic principles to different business stages
Dynamic planning will look different depending on the industry and the growth stage of your business. However, the principles remain the same. Together, we can review what it may look like for two different business life cycle stages: established businesses and new businesses.
Dynamic planning for established businesses
The older your business is, the harder it can be to enact change. Still, if you strive for continuous improvement, switching to a dynamic planning process is necessary, and here’s how to do it effectively:
Review your goals
First, review your goals from last year. Which ones did you meet, fail, or exceed? Going over what you’ve done in the past adds context, and can help you better develop a new dynamic plan. Re-establish your vision, set clear goals, and determine what changes you need to make to get there.
Present the changes to your team
Once you know where you want to go and how to implement dynamic planning, present it to your team. The best way to get your team on board is by telling a story. It’s the best way to unite everyone and give them an emotional connection to what you want to do. Your story could start with the origins of the company and your bigger-than-life dream for it. Then, explain what has happened since then and why you’re implementing the changes.
Present your challenges, followed by solutions
State the challenge you face today, then offer a new solution. Dynamic planning will allow the company to grow faster, make quick changes when needed, and empower your team to do the best job they can.
Reevaluate business strategy through a dynamic lens
Once your team is on board, use the dynamic planning model to reevaluate every operation and process within the company. For example, let’s say you review your customer service. You notice their scripts aren’t as effective as you’d hope.
So you revise them, plan how they will be delivered, test them out, and review them again. If you see better results and how it affects long-term sales, you could respond by reallocating resources to reflect those discoveries and investing in more customer service resources and training.
To get their dynamic planning off the ground, businesses that are already up and running should focus on communication, training, and reviewing old processes.
Dynamic planning for new businesses and small companies
Change can happen fast in a small business or startup. You’re wearing multiple hats, and things feel like they could go out of control at any moment. It’s an exciting time, but it’s also scary.
When you implement a dynamic strategy, you prepare yourself for these ups and downs. As a result, your review intervals might look shorter, but constantly reviewing how you are doing and where your resources are going will help you grow in an ever-changing climate.
Switch to dynamic planning as soon as possible
Newer businesses have an advantage. They can build dynamic planning processes into their DNA from the beginning. If you want to adopt dynamic planning, now is the time to include it in your decision-making process.
A new business can test an idea quickly, learn from it, and improve by adopting a dynamic planning methodology. Through a tight, real-time feedback loop, new businesses can use data to improve as they grow.
Focus on just one goal at first
Clarify where you want to go, and the steps needed to get there. By focusing on one goal, businesses can use their limited resources to become the best in their market. Build to be better, not bigger, and customers will see your value.
Once your resources and plans allow you to focus on more goals, follow the above-mentioned steps of dynamic planning, altering them to fit your current needs.
Static vs dynamic planning
Static planning is a traditional planning model that doesn’t leave enough room for changes, even if those changes are beneficial for your business. Though traditional planning models served their purpose in business strategy for decades, they are far too static for the current, ever-changing market.
Dynamic planning allows you to stay up-to-date with the latest trends in the market and make instantaneous changes based on real-time feedback. This is helpful for the digital transformation that most businesses are going through these days.
A dynamic strategic plan is flexible and offers enough room for changes, allowing you to seize opportunities much more quickly and efficiently than with a static planning process.
Upgrade to dynamic planning with Profit Frog
Dynamic planning is a continuous improvement mindset put into action. An effective dynamic planning process allows you to move fast and grow a healthy company. By reviewing your goals and results often, revising them, and adjusting your resources based on your findings, you can raise a company that withstands any challenge in the market.
Great teams need great tools, and there’s nothing better for dynamic planning than Profit Frog. We let you simulate ideas, model different potential scenarios, study data sets, and make the best decisions for your company. Check out our free trial and see how dynamic planning can help your business.
Dynamic planning FAQ
What are the four types of planning?
The four main types of planning are:
- Operational planning: an operational plan focuses on day-to-day activities and details how things need to happen
- Strategic planning: a strategic plan looks at the strategy behind operational planning, looks at the big picture, and details why things need to happen
- Tactical planning: a tactical plan consists of many detailed, short-term plans that support a high-level strategic plan
- Contingency planning: contingency plans refer to unexpected events, both positive and negative, and your response to these events
Each of these four types has its place in your business strategy and can either be static or dynamic.
Is planning a dynamic function?
Planning can be a dynamic or a static function. When it comes to business strategy, having a plan that is dynamic can be immensely beneficial, especially if your business serves a market that’s constantly changing and evolving.
How do you plan for a dynamic environment?
Planning for a dynamic environment means you have to set clear goals and keep them in mind while allowing enough leeway to seize opportunities that can bring more success to your business. This whole process can be overwhelming. But, fear not, Profit Frog is here to help. We specialize in helping small businesses plan for dynamic scenarios with risk management in mind.
What is flexible planning?
Flexible planning is an essential part of the financial planning process. This dynamic planning method helps you create a high-level project plan that’s adjustable. An efficient flexible plan will monitor potential risks and challenges, help you improve your weak points, and aid in the continuous improvement of your business.
How does a manager plan a dynamic environment?
Managers should plan for a dynamic environment by using plans that are specific, yet flexible. With the rise of artificial intelligence and machine learning, programs that use a dynamic planning algorithm can be beneficial to managers. These programs can help managers avoid double calculations and other common pitfalls of dynamic planning.
And, if this all sounds too confusing to you, Profit Frog is here to simplify the process. By focusing on teaching small business owners and managers what profit and loss is and how to use it effectively in their dynamic plans, we allow you to focus on data sets that truly matter for the success of your business (such as your financial performance), instead of overwhelming you with unnecessary, difficult-to-grasp data.
What is an emergency management plan?
Emergency management planning is a method used in risk management. An emergency management plan is put in place to lessen the damage of potential events that could endanger your company’s ability to function and be profitable and should include measures that ensure the safety of your employees, property, and facilities.
Further reading on small business profitability
How to calculate year-over-year growth
Are costs of goods sold considered an expense?
What are the differences between profit and cash flow?
What is COGS and how to use it for your small business?
Revenue vs profit: what are the differences?
What are scenario planning templates and how to use them?
What is the difference between COGS and OPEX?
What are the advantages and disadvantages of scenario planning?
What is the difference between COGS and SG&A?
What are the types of scenario planning?
Understanding gross profit vs net profit
What is P&L and how can I use it?
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