Business planning: A prerequisite for every business

Business planning is the most misunderstood tool in small business entrepreneurs, family-run business or sole traders. This tool has only become a necessity for these businesses only when they are sourcing funding for their projects. Business planning is a prerequisite for every business no matter how small and even when no outside sourcing of funds is required.

 

According to Forbes, start-ups' failure rate of businesses is 44%, and the main reason boils down to a lack of proper preparation. For a business, preparation starts with business planning.

 

What is business planning?

 

To plan is to decide on and make arrangements for in advance. A plan is a roadmap that details how a desire or goal will be achieved. The Business Dictionary defines a business plan as a written account of the intended future course of action aimed at achieving specific goals or objectives within a particular time frame. A business exists to fulfil its mission and goals, and therefore requires a roadmap. Without writing it down, there is no point of reference and guideline to follow in the carrying out of the business. The need for a point of reference to guide activities is why it is necessary to have a business plan documented. Business planning has become an annual activity or process for focused businesses. The process challenges business people to redirect their actions towards the primary purpose of their business and remain focused on the main goal. That way, business owners do not go about doing business randomly, waiting for something to happen rather than making things happen. A business plan is also a tool used to attract investors.

 

Business Planning Process steps

 

1.       Business description

This step describes what the company is and what it does. It outlines the mission, vision, and business overview. It makes the value proposition of the business clear to potential investors.

 

2.       Business Analysis

Business analysis helps an organization to optimize its skills. It is a way of identifying business needs, problems it is going through, and the solutions available. These are incorporated into the plan. Business analysis will include:

●        Industry analysis

●        Competitive analysis

●        Market analysis

●        Internal analysis

●        Management and people analysis

 

3.       Define Goals

Goals are the desired outcomes that a business wants to achieve. They are broad and derived from the mission statement, vision, and business analysis. An example of a goal can be "To achieve 45% market share in the industry" or "To grow sales by 50% from the previous year". Goals specify a target.

 

4.       Map up strategies

To achieve the goals as outlined above, managers must adopt strategies. A strategy defines the approach that the business is going to take to achieve the goals. Strategies are broken down into the operational, market, and financial strategies.

 

5.       Set objectives

Objectives are action plans that break down how the strategies are implemented. Action plans are set for each strategy and split as follows:

●        The operational plan focuses on the daily activities of the business to support the operational strategy. It maps out the actions required by departments. It aims to allocate resources, funds, and staff to propel the goals and strategies.

●        A marketing plan outlines how the service/product is made available to the market by using the marketing mix to support the marketing strategy.

●        The financial plan lays out the capital requirements, how it's raised, and how it's used. The financial plan may be in the form of a 3-year or 5-year projection. The projected income statement shows the performance of the business over the period. The projected balance sheet shows the value of the company, and the cash flow forecast shows the cash movement. These projections should be followed by financial statements analysis that will show whether the goals are achieved or not. If not, then managers must go back and realign the strategies and objectives.

Objectives should be specific, measurable, achievable, realistic and time-bound (SMART).

 

6.       The business plan document

The business plan document depends on the use of the business plan, either internal or external use.

●        If it's for internal use, it will serve as a blueprint manual that managers will refer to during the period and for review of its success after a certain period.

●        If it's for external use, then elements like the executive summary will be included, and the presentation is adjusted for the intended audience without losing the plan itself.

 

Business planning for the first time can be a daunting task; therefore, managers may consider using a professional to guide them through the process. A business plan is specific and unique to each business. You cannot copy another's business plan; neither can you buy a ready-made plan. Business planning is a thought-through process that requires those running the business to set goals that can push them to perform to achieve them. Let a professional guide you through it by contacting us.

Enjoy one hour of a free consultation with us.

                                             Make an appointment