My favorite quote on business planning is when former president Dwight D. Eisenhower said: “The plan is useless; but planning is essential.”

What I’ve always taken from that is the importance of keeping a plan live; reviewing it, and revising it. The core concept of my work on lean business planning is that cycle: plan-run-review-revise. One of my favorite quotes from what I’ve written previously is “The value of a plan is the decisions it causes.”

All of which brings me to the subject of how to track and review a business plan, so you can make decisions with it, and run your business better.

Plan vs. actual is the key

The math is simple enough. For example, let’s say that the sales forecast in your plan indicated that you were going to sell 200 of Thing One and 75 of Thing Two, but then the actual outcome, what really happened, is that you sold only 175 of Thing One but 125 of Thing Two.

Here’s some simple vocabulary: In accounting and financial analysis, the difference between plan and actual is called variance. It’s a good word to know.

Furthermore, you can have positive (good) or negative (bad) variance. So in our example above, the plan vs. actual—called variance—of the first product, Thing One, is negative, 25 less than you had planned. The plan vs. actual of the second product is positive, 50 more than planned.

The business value of this is tracking progress, making course corrections, and hopefully improving future outcomes. These variances aren’t just numbers, they are clues to unlocking a better future for your company. They lead to discussions of what went right, what went wrong, and what to change.

Did you sell fewer Thing Ones than you planned to merely because your forecast was inaccurate, or was it because something went wrong in the execution, like failing to do enough product promotion? Maybe your pricing was too high. Maybe you didn’t realize you had new competition. What, if anything, should you adjust?

Why did you sell more Thing Twos than you expected? Has the market and demand changed? Did you have some good luck, like media mentions or a favorable review? Perhaps you should revise your plan to put some more effort into Thing Two, since it seems to be selling better?

Look at the related sales and marketing efforts that led to these results. Has one person done exceptionally well, while another failed to meet expectations?

That kind of thinking is what goes from tracking progress to improving your business and exceeding your goals. Plan vs. actual analysis is a collection of clues to be followed up. Every surprise, good or bad, leads to a discussion.

Management goes beyond the numbers

When it comes to tracking these metrics, the numbers are there to spark discussion among management.

For example, supposedly, having your expenses come out less than planned would be a good thing, right? Technically, costs and expenses being less than what you planned for is a positive variance. But what if your marketing expenses last month came out lower than the original plan because the Facebook ads weren’t set, or the planned seminars didn’t happen? That’s more like bad news about failure to execute than good news on saving money.

You should also look at progress toward the milestones in your business plan. Ask yourself and your team in regular review meetings whether or not you are on schedule to meet your goals. If you are going to miss a milestone, you should know that ahead of time, so you can make adjustments.

What else depends on the milestone? For example, a product launch often requires coordinated promotion in social media. You don’t want to have things scheduled to go out on social media but time the publishing wrong because of a missed milestone on the product side.

Engagement, not enforcement

The goal of building performance metrics into a plan is to develop collaboration. Numbers should be an invitation to collaboration, not a threat. In theory, management is a matter of setting expectations and tracking results, to compare expectations to results; but in practice, what works is using measurements to identify problems early and work toward solutions together.

So, for example, if the review meeting shows leads supposed to be generated through the marketing activities are trailing behind expectation, that should trigger discussion of what has changed, and how to correct it. Maybe the assumptions have changed, maybe the expectations were too high, and maybe somebody has been falling behind. Dig into causes and figure out what to change.

Improvement comes in small steps

Hitting and exceeding goals is rarely a matter of big events. Instead, it’s consistent progress over time with frequent small corrections. Use your lean business plan to set the highlights in strategy, tactics, and specifics; then follow up with regular review to make sure the details are going right in the day to day.

How do you use your business plan to track your progress?

Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.