In a previous post, we’ve looked at how to create a successful business plan. But what is the value of business planning? Should you do it? Find out 18 helpful ways that business planning can add value to your existing or potential venture.
A Business Plan is a written document prepared by the entrepreneur, describing all the relevant internal and external elements involved in starting a new venture or sustaining an existing one. The business plan answers the questions: Where am I coming from? where am I? Where am I going? How do I get there?
THE VALUE OF BUSINESS PLANNING
It helps in determining the viability of the venture in a designated industry, sector or market. It also provides broad guidance to the entrepreneur in organizing the planning and implementation activities and it is valuable to potential investors or sponsors/ financiers.
WHY YOU NEED A BUSINESS PLAN
1. To prove that you’re serious about your business. Formal business planning is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business.
2. To establish business milestones. The business plan should clearly lay out the long-term milestones that are most important to the success of your business.
3. To better understand your competitors and your competitive advantage. It is critical to understand your company’s competitive advantages.
4. To better understand your customers. Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to an effective business plan and to a successful business venture.
5. To assess the feasibility of your venture. How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture.
6. To document your revenue model. How exactly will your business make money? Documenting the revenue model helps to address challenges associated with the model.
7. To determine your financial needs. The business plan creation process helps you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital.
8. To attract investors. Formal business planning is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service?
9. To reduce the risk of pursuing the wrong opportunity. The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities.
10. To force you to research and really know your market. What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service?
11. To attract employees and a management team. To attract and retain top quality talent, business planning is necessary. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its strategic goals.
12. To plot your course of actions and focus your efforts. Business planning provides a road-map from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones.
13. To attract partners. Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and businesses will be more likely to partner with your venture if they can read a detailed explanation of your company.
14. To position your brand. Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to clearly describe the business and position the brand to customers, investors, and partners.
15. To judge the success of your business. Formal business planning allows you to compare actual operational results versus the business plan itself. It allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not!).
16. To reposition your business to deal with changing conditions. For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to re-define, try, and re-validate new ideas and strategies.
17. To document your marketing plan. How are you going to reach your customers? How will you retain them? What is your advertising budget? What price will you charge? A well-documented marketing plan is essential to the growth of a business.
18. To understand and forecast your enterprise’s staffing needs. After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a road-map for your staffing needs, and thus helps to ensure smoother expansion.
THE STRUCTURE OF BUSINESS PLANNING
Business planning involves a systematic analysis of business operations, activities and structure in order to identify the long-term development plans of the business organisation.
A well-structured business planning process will incorporate 3 inter-related plans:
1. A business plan will identify the long-term goals and objectives of the organisation.
2. An operational plan details how these long-term plans will be implemented during the period of the plan.
3. An administrative plan details the business support needs which will need to be developed in order to ensure the successful implementation of the overall strategic plan.
If a business organisation does not engage in planning activities there is likely to be an adverse impact upon business performance for the following reasons:
- no control of business operations
- no understanding of market needs
- no targets established to monitor performance
- no quality standards established
- no financial performance indicators identified.
A business organisation planning to implement major changes to its business operations will require the following:
1. up-to-date, accurate and reliable management information that will inform management decisions
2. targets will need to be established which are based upon accurate research and information, presented in a format that promotes understanding
3. effective communications between the functional areas within the business in order to co-ordinate the planning process
4. monitoring systems will need to be established in order to assess business performance against the set targets
5. consultation with key stakeholders such as individual employees, their managers/supervisors and staff teams will enable them to understand their contribution to the overall success of the business.