CHAPTER 1
BUSINESS PLANNING
This chapter covers the task of business planning which is applicable to all businesses whether a sole trader or a multinational conglomerate. The production of a business plan is needed to describe the business, its objectives, its strategies, the market it is in and its financial forecasts. It is often used as a tool for measuring the performance of the organization against that intended over a short- or medium-term period, typically three to five years. For many new businesses the business plan may be used as a tool to promote an interest in the business and to secure external funding and as such needs to be undertaken as a serious task. In addition to this, a business plan has several other purposes as it:
ā¢ Prompts management to logically examine the business in a structured way and consider what it currently does and what it wishes to do in the future.
ā¢ Encourages management to set future business objectives and then monitor progress against the plan.
ā¢ Identifies the resources and time needed to implement the business plan.
ā¢ Can be used to communicate the key features of the business plan to employees and provide them with an awareness of the businessās direction.
ā¢ Provides links to the detailed, short-term functional strategies.
This chapter also shows the basic stages in producing a business plan and the planning cycle which also looks at past performance and what needs to be addressed as new targets and objectives. Indeed the focus on the business plan is likely to be on three areas: setting realistic goals for the business to aim for, demonstrating how its objectives will be met and finally identifying what resources in terms of people, plant and investment will be required by the organization to achieve the plan.
Although there is no set formula for the contents of a business plan, a typical layout is provided in this chapter as a good starting model for those embarking on its production. For those who do so with an external reader in mind - bank, shareholders, etc. - then adopting a common format is likely to convince the lender that the organization at least knows how to portray its business and ambitions in a professional and recognizable way. On completion of the task a checklist on the business plan feasibility is also included, this covers the key questions on the management, marketing and financial aspects of the plan which need to be addressed either directly or indirectly in the plan.
For new businesses the business plan should also describe how the company will operate from its launch until it has established itself in the market. In practice there should be a detailed narrative on the first six months as this is when costs in establishing the business are being incurred - in developing a market, recruiting staff, negotiating with suppliers, etc. - contrasted with no or low income, particularly if part of a supply chain, when customersā terms of payment are unlikely to be favourable in terms of timescale and hence the subject of cash flow needs to be described. Having invested time, effort and some cost in producing the business plan with its objectives clearly articulated, this should not be limited to senior management or shareholders but should be used in the business and updated as new environmental opportunities and threats arise. This tool will help to keep track of current performance and development plans. The final point to consider is that business planning is not a on/off isolated event; it needs to be used, reviewed and periodically repeated to ensure that the business is achieving its desired level of performance.
TRADITIONAL APPROACH TO STRATEGIC IMPLEMENTATION AND BUSINESS PLANNING
While this model presents the ideal approach, in practical terms this is a much more inter-related process; however, the benefit of the model is to illustrate that determining the Vision and Mission are important steps in strategy formulation and in setting the business plan.
THE PLANNING CYCLE
This simple model has links into research and data gathering, analysis and options studies, strategic management in the form of setting objectives and finally in performance management often related to people performance objectives. While this is shown here in a business planning context it also has applications at an individual level as part of career appraisal and personal development and in training needs identification.
UNDERSTANDING THE PRODUCT/SERVICE
This is a typical approach which can be used to understand a product or service business with a client organization to demonstrate and promote the planning process.
The questions shown below, together with establishing a view of the future for the organization and...