what are the principles of business planning

Lean Business Planning

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5 Principles of Business Planning

These 5 principles of business planning apply especially well to lean business planning and lean business plans. We focus on lean planning here but you can see, if you have experience with business, that they apply to all good business planning. Charles Darwin wrote:

“It is not the strongest of the species that survive, not the most intelligent, but the one most responsive to change.” Tweet

Business planning is a Continuous Process, Not Just a Plan . One business plan is of very little use, but the lean business planning process is essential. Keep the plan small and review and revise often.
Good business planning Assumes Constant Change . Lean business planning helps to manage change. You don’t plan on long time frames and then stick to the plan regardless. Instead, your business planning process helps to manage change.
Good business planning Empowers Accountability . Good business planning establishes specific responsibilities, dates, deadlines, activities, and performance metrics. The process includes tracking and following up to manage.
Understand that It’s Planning Not Accounting . Financial projections in business planning are educated guesses, summarized and aggregated to optimize their use in decision making, tracking, and managing. They are not statements, but projections. A projected profit-and-loss table does look like the output of accounting, and that confuses people. It is never exact. It is predicting the future. It is guessing.

Keep these five principles of business planning in mind from the beginning.

10 Principles of Planning in Management

Table of Contents

Principles of Planning in Management

Planning refers to the predetermination of future courses of action to achieve desired organizational objectives. It is an important function of management .

Planning aims to ensure efficient goal achievement. For this, effective planning is necessary. As a manager , you must create effective plans that drive success to the business.

Below are the 10 key principles of planning to create effective plans.

Contribution to Objectives Principle

The principle of contribution to objective highlights the essential link between planning and an organization’s objectives. It emphasizes that every plan should align with and contribute positively towards achieving the set goals and objectives.

When plans are formulated with a clear focus on contributing to the predetermined objectives, they become purpose-driven. Each step and action within the plan are chosen strategically to lead directly toward the desired outcomes.

This principle ensures that planning efforts are not in isolation but are incorporated into the structure of the organization’s purpose. It guides the selection of tasks, resources, and strategies that harmoniously work toward the intended objectives.

Efficiency Principle

The efficiency principle of planning highlights the importance of achieving desired outcomes with minimum cost and effort. It aims to optimize resource utilization and minimize wastage.

Related: 10 Steps To Create An Effective Plan

When planning with efficiency in mind, managers carefully evaluate the most cost-effective methods to achieve goals. Unnecessary steps or resource allocations are minimized, leading to streamlined and resource-efficient plans.

Efficiency ensures that plans are not only successful but also sustainable. By utilizing resources wisely, organizations can achieve their objectives while maintaining financial and operational health.

Flexibility Principle

Flexibility in planning acknowledges the dynamic and ever-changing business environment . It suggests that plans should be adaptable to accommodate unforeseen changes and challenges.

While designing plans, considering potential variations and alternatives allows for easier adjustments when circumstances change. Plans become versatile roadmaps that can navigate through uncertainties.

Flexibility prevents plans from becoming rigid and ineffective when confronted with unexpected shifts. It encourages proactive responses to changes, ensuring that the organization remains resilient and capable of staying on track despite challenges.

Commitment Principle

The commitment principle of planning emphasizes that effective planning requires a dedicated allocation of resources, including time, expertise, and effort. It advocates for the wholehearted engagement of individuals involved in planning.

When a commitment is made to planning, organizations gather the necessary expertise, resources, and support. This commitment drives the planning process forward with dedication and seriousness.

Commitment ensures that planning receives the attention and effort it deserves, leading to well-thought-out and comprehensive plans that are more likely to succeed.

Timing Principle

The timing principle highlights the importance of prioritizing and sequencing tasks within a plan. It emphasizes when certain activities should be initiated and completed.

By carefully considering the timing of each task, plans can be structured to optimize resource availability, avoid bottlenecks, and ensure a smooth flow of activities.

Proper timing prevents inefficiencies and delays, enhancing the overall execution of plans. It also aligns plans with external factors, such as market trends or seasonal demands, increasing the plan’s chances of success.

Pervasive Principle

The pervasive principle of planning emphasizes that planning is not confined to a single level of management but is relevant and necessary at all levels of the organization . It underscores the widespread nature of planning across different managerial roles and responsibilities.

Recognizing the pervasiveness of planning encourages collaboration and coordination among various levels of management. Plans are developed holistically, incorporating insights and expertise from all corners of the organization.

Related: Top-Level Management

This principle ensures that planning is not isolated or fragmented. Instead, it fosters a comprehensive approach where plans are interconnected, aligned, and contribute collectively to the achievement of organizational goals.

Principle of Alternatives

The principle of alternatives asserts that effective planning involves exploring and evaluating multiple options before making decisions. It highlights the importance of considering various courses of action to identify the most suitable one.

Incorporating alternatives prompts thorough analysis and critical thinking. By examining different possibilities, planners can choose the optimal path that aligns with the organization’s objectives and resources.

This principle guards against hasty decisions and promotes well-informed choices. It ensures that plans are comprehensive, adaptable, and equipped to handle potential challenges or changes in the business landscape.

Limiting Factor Principle

The limiting factor principle recognizes that certain constraints or factors can restrict the realization of goals. It emphasizes identifying and addressing these limiting factors to optimize planning outcomes.

By pinpointing limiting factors, managers can focus their attention on finding solutions or workarounds. This proactive approach ensures that plans are tailored to overcome specific hurdles, enhancing the likelihood of success.

Comparative Strategies Principle

The comparative strategies principle highlights the significance of understanding and considering the strategies of competitors in the industry. It suggests that effective planning should account for rival organizations’ actions and intentions.

Analyzing competitive strategies enables organizations to position themselves strategically within the market. By aligning plans with industry dynamics, organizations can capitalize on opportunities and mitigate threats.

This principle enhances the organization’s competitive edge by making plans more responsive to market trends and competitive pressures. It helps organizations anticipate rivals’ moves and craft plans that ensure a favorable market position.

Acceptance Principle

The acceptance principle of planning is the last in our list of 10 principles of effective planning. It emphasizes that plans should be comprehensible, feasible, and embraced by all stakeholders involved. It highlights the importance of collective support and buy-in for the proposed plans.

When plans are designed with acceptance in mind, they become more practical and realistic. Involving relevant stakeholders and considering their input fosters a sense of ownership and commitment.

Acceptance ensures that plans are not only well-structured but also implementable. It fosters a culture of collaboration, where individuals are motivated to execute the plans effectively, leading to successful outcomes.

Read Next: The 14 Principles of Management

Sujan Chaudhary is a BBA graduate. He loves to share his business knowledge with the rest of the world. While not writing, he will be found reading and exploring the world.

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15 Principles of Planning in Management (With Examples)

Principles of Planning in Management is the fundamental function of every management. It lays the foundation for the success of an organization. Effective planning helps organizations allocate resources efficiently, enhance decision-making, and reduce uncertainties.

Just as every systematic knowledge is based on some important principles, management and managerial functions are also dependent upon some principles of planning.

Table of Contents

The 15 Principles of Planning in Management

The 15 Principles of Management view an organization from a top-down approach and help managers get the best out of their employees and run the business with ease. Let’s take a look at each of these principles and understand them in detail.

Principle 1: Division of Work

This principle states that if an employee is given the same, specific task to do again and again, they will become more efficient and skilled in it. This is opposed to the concept of multi-tasking. Segregating work amongst the workers will also enhance the quality of the product.

This principle of division of work improves the productivity, efficiency, accuracy and speed of the workers and also makes them skilled. It is appropriate for both the technical as well as managerial work level.

Example – At an office, every department has a different responsibility, like IT, administration, human resources, marketing etc. These responsibilities are taken care of by employees specializing in that particular department, thus increasing productivity, efficiency and making them specialists in their field.

Principle 2: Authority and Responsibility

Authority and responsibility are the two key aspects of management. A manager needs to have authority to ensure that his instructions are carried out by the employees. This authority should come along with responsibility, and there needs to be a balance between authority and responsibility.

If managers did not have any authority, they would lack the ability to get any work done. However, if there is more authority than responsibility, the employees will get frustrated.

Principle 3: Discipline

Without discipline, nothing can be achieved. It is the core value for any management or any project. In order to achieve discipline in an organization, there is a need for good supervision and impartial judgment. Good and disciplined behavior of the employees also helps them smoothly build and progress in their professional careers.

Principle 4: Unity of Command

According to this principle, there should be a clear chain of command in the organization.

Employees should be clear whose instructions to follow, and a particular employee ought to receive orders from only one manager. If an employee works under two or more managers, then the stability, authority, and discipline are threatened. This will even cause a breakdown in management structure and employees will burn out.

Example- If an employee has been given a task, and the immediate superior asks him/her to finish it within 3 to 4 hours,but the head of the department orders him/her to deliver that task within 1 hour – in such a case, having no unity of command can not only create confusion but also pressure in the workplace.

Principle 5: Unity of Direction

The work to be done in an organization or management should be organized in such a way that employees work in harmony towards the same objective, under the direction of one manager, and using one plan. When all the employees have a unified goal and motive, it makes the work easier and achieves the set goal easily.

Example – For a range of marketing activities such as advertising, sales promotion, budgeting, etc., there should be only one manager who should be using one plan for all these marketing activities. The different activities can, however, be broken down for different sub-managers, but they should all work towards the common goal under the direction of the main person in charge of the whole thing.

Principle 6: Subordination of Individual Interest

This principle states that an organization should work unitedly towards the interest of the company rather than personal interest. The interest of the company should not be disrupted by the interest of an individual. This refers to the whole chain of command in an organization.

Principle 7: Remuneration

This principle plays an important role in motivating the workers of a management. It states that workers should be paid fair wages for the efforts and work they carry out. If an organization underpays its workers, it will struggle to motivate and keep quality workers. Remuneration can be monetary or non-monetary. There also needs to be a structure in place to reward good performance to motivate employees.

Principle 8: Centralization

Centralization means the concentration of power in the hands of the authority. This follows a top-bottom approach in management. Decentralization Is when this authority is distributed to all the levels of management.

Complete centralization means that people at the bottom will have no authority over their responsibilities. Contrarily, complete decentralization will mean no superior authority to control the organization.

Therefore, no organization can be completely centralized or decentralized. To use this principle effectively in the modern context, there should be a balance of centralization and decentralization. The degree to which this balance needs to be achieved will differ from organization to organization.

Principle 9: Scalar Chain

Scalar chain implies that there needs to be a clear chain of communication between employees and their superiors. Employees should know where they stand in the hierarchy of the organization and who their immediate senior is, and to whom they should be able to contact, if needed.

Example – Every company has a specific scalar chain. Right from the highest level of superiors, like the founder or CEO, to the lowest level of subordinates, it follows a hierarchy for maximum productivity.

Principle 10: Order

According to this principle, there should be an orderly placement of resources in the right place at the right time (money, manpower, materials, etc.) This ensures proper use of resources in a structured fashion. Misplacement of any of these resources might lead to misuse and disorder in the organization.

Example – Employees should be given a designated space and the right equipment or tools to complete their work efficiently.

Principle 11: Equity

All employees should be treated equally and respectfully, irrespective of gender, religion, race, and sexuality. They must feel safe, seen, and heard. All employees should be given equal opportunities to flourish and grow in their careers within the organization. It’s the responsibility of the manager to see that no employees face discrimination.

Principle 12: Stability of Tenure

An organization should work to minimize their staff turnover and maximize efficiency. A new employee doesn’t get used to the culture of an organization right away. He/She should be given enough time to settle into their new jobs and become efficient. Old and new employees alike, should also be ensured job security as instability can lead to work inefficiency.

There needs to be a clear and effective method to handle vacancies as it takes time and expense to train new workers.

Principle 13: Initiative

The management should encourage and support their employees to take initiatives in the business organization. They should listen to the concerns of their employees and also encourage them to develop and carry out plans for improvement.

Taking suggestions from employees regarding certain issues in the organization can make them feel seen and heard in an authoritative position. This will give them a sense of achieving something for the team.

Principle 14: Cost-Benefit Analysis

This principle states that the allocation of resources should be optimized as they are finite. Cost-benefit analysis helps determine the potential costs of implementing a plan against the benefits that it is expected to generate. This evaluation makes sure that the organization’s resources are utilized judiciously and that the benefits outweigh the expenditures.

Principle 15: Esprit de Corps

Esprit de Corps simply means “Team Spirit”. Every management should strive to create morale, unity, and cooperation among the employees. Team spirit is a great source of strength in any organization. Happy and motivated employees are more likely to be efficient and productive.

Example – While discussing a new plan of action for achieving next month’s targets, using the word ‘We’ instead of ‘I’ brings a teamwork spirit to the group.

Objectives of Planning in Management

The objectives of planning in management can be summarized in the following points:

Planning helps in Achievement of Organizational Objectives
Planning helps in fulfillment of Organizational Commitments
Planning helps in Decision Making
Planning provides Stability to Organizations
Planning gives an Overall View of Coordination
Planning helps in Optimum Utilization of Resources or Efficiency of Operations
Planning aids in Development of Managers
Planning promotes Innovation and Creativity
Planning provides a Basis for Control
Planning helps in Reduction of Risk
Planning provides Morale Boost Up or Motivation
Planning facilitates Delegation
Planning helps in identifying Future Opportunities and Threats

Types of Planning in Principles of Management

The different types of planning in principles of management fall under different classifications. In this part, we will look into the different categories and the types of plans that fall under them.

1. On the Basis of Hierarchy or Levels in the Organization

a) Strategic Plan

b) Tactical Planning

c) Operational Planning

2. On the Basis of Use

a) Single Use Plans

b) Standing Plans

3. On the Basis of Flexibility

a) Flexible Plan

b) Specific Plan

4. On the Basis of Time

a) Short-term Plans

b) Medium-term Plans

c) Long-term Plans

5. On the Basis of Functional Areas

a) Production Plans

b) Marketing Plan

c) Financial Plan

d) Human Resource Plan

The Final Word

In conclusion, these 15 Principles of Management are the pillars of any organization. These principles are integral for planning, prediction, process management, decision-making, control and coordination, and hence, should be implemented in every aspect of management.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

what are the principles of business planning

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

A business plan is a document detailing a company's business activities and strategies for achieving its goals.
Startup companies use business plans to launch their venture and to attract outside investors.
For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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2 Developing a Business Plan

Learning Objectives

After completing this chapter, you will be able to

Describe the purposes for business planning
Describe common business planning principles
Explain common business plan development guidelines and tools
List and explain the elements of the business plan development process
Explain the purposes of each element of the business plan development process
Explain how applying the business plan development process can aid in developing a business plan that will meet entrepreneurs’ goals

This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

Defines the vision for the company
Establishes the company’s strategy
Describes how the strategy will be implemented
Provides a framework for analysis of key issues
Provides a plan for the development of the business
Helps the entrepreneur develop and measure critical success factors
Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles [1]

Hindle and Mainprize suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles .

First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity , the context within the proposed venture will operate (internal and external environment), and the business model.

There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team . Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal , or the value that targeted readers should expect to derive from their involvement with the venture. [2]

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.
Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.
Make certain all of your pages are ordered and numbered correctly.
The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan, be 100% certain each of the following requirements are met:

Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
You should include all the information necessary for readers to understand everything in your document.
The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.” This statement might mean there is a total shortage of 100,000 units, but competitors are filling this gap by producing 25,000 per year; in which case there will only be a shortage for four years. However, it could mean that the annual shortage is 100,000 units and only 25,000 are produced each year, in which case the total shortage is very high and is growing each year.
You must always provide the complete perspective by indicating the appropriate time frame, currency, size, or other measurement.
If you use a percentage figure, you must indicate to what it refers—otherwise the number is meaningless to a reader.
If your plan includes an international element, you must indicate in which currency or currencies the costs, revenues, prices, or other values are quoted. This can be solved by indicating up-front in the document in which currency all values will be quoted. Another option is to indicate each time which currency is being used, and sometimes you might want to indicate the value in more than one currency. Of course, you will need to assess the exchange rate risk to which you will be exposed and describe this in your document.

6. Ensure credibility is both established and maintained. [3]

If a statement presents something as a fact when this fact is not generally known, always indicate the source. Unsupported statements damage credibility.
Be specific. A business plan is simply not of value if it uses vague references to high demand, carefully set prices, and other weak phrasing. It must show hard numbers (properly referenced, of course), actual prices, and real data acquired through proper research. This is the only way to ensure your plan is considered credible.
Your strategies must be integrated. For example, your pricing strategy must complement and mesh perfectly with your product/service strategy, distribution strategy, and promotions strategy. For example, you probably shouldn’t promote your product as a premium product if you plan to charge lower-than-market prices for it.

7. Before finalizing your business plan, re-read each section to evaluate whether it will appeal to your targeted readers.

Useful Resources for Business Planning

Financial Performance Data : Innovation, Science and Economic Development Canada
BizPal for accessing licensing and other needs
Canada Revenue Agency for CRA asset classifications
Canadian Company Capabilities database to use to find suppliers and buyers
Merx for finding possible Canadian Government contracts
The Conference Board of Canada
Bank of Canada
Scotia Bank
Bank of Montreal
Business Loan Calculator

Library Resources

NSCC Library – Business Databases [journals and other resources]

Employee compensation calculators

Salary Data & Career Research Center – Canada

Existing business plans

The Word and Excel templates in this book

Business Plan Template (Word)
Business Plan Template (Excel)

Business Plan Development Tools

Credibility and communication.

According to Hindle and Mainprize, strong business plans effectively communicate the necessary information to the targeted readers while also establishing the credibility of the plan and the entrepreneur. [4] The Credibility and Communication Meter icon is used throughout this book to highlight where and how business plan writers can improve the quality of the information and enhance their and their plan’s credibility.

Credibility and Communication Meter

Use the following tools to improve the information in and credibility of your plans:

The Ratchet Effect

A ratchet is a tool that most of us are familiar with. It is useful because it helps its user accomplish something with each effort expended while guarding against losing past advancements.

With each word, sentence, paragraph, heading, chart, figure, and table you include in your final business plan, the ratchet should move ahead a notch because you achieve two important things.

First, only needed and relevant information is included.

Second, your additions build credibility in a relevant way.

Apply the ratchet effect by making sure that each and every sentence and paragraph conveys needed and relevant information that adds to your and your plan’s credibility. Use the following principles: Rarely—and only if it truly needs to be said again—repeat something that you have already said in your plan.

Avoid using killer phrases, like “there is no competition for our product” or “our product will sell itself, so we will not need to advertise it.” Any savvy reader will understand that these kinds of statements are naive and demonstrate a lack of understanding about how the market and other real-life factors actually work.

Avoid contradicting yourself. Make sure that what is said in the written part of your plan completely syncs with what is said in the other parts of your plan. Likewise, ensure that what you include in the financial parts of your plan is completely in sync with what is said the written part.

The Magic Formula

Apply the following magic formula throughout your write your plan.

…consideration X affects my business because…
…consideration X is subject to this trend into the future…
…which means that we have decided to do this…(or) will implement this strategy…in response to how the expected trends for consideration X will affect my business

Here is an example of how you can use the magic formula to develop part of the pricing strategy in the marketing plan part of your business plan: We expect that our expenses to run our business will rise with the rate of inflation, which means that we must plan to increase the prices on our products to establish and maintain our profitability. The Bank of Canada (201x) has projected that the general inflation rate in <the city in which my business will operate> will be 3.0% in 201x, 3.5% in 201y, and 4.0% in 201z. In our projected financial statements, therefore, we have inflated both our expenses and our prices by those rates in those years.

Context and Framing

You must provide the right context when you describe situations, strategies, and other components of your plan. Business plan readers should never be left to guess why you indicate in a business plan that you will do something. Proper context is needed to help you frame the information you present.

When you frame the stories you tell correctly, the ratchet effect will happen and your plan will be stronger. One example of effective framing is when you, as the writer of the plan and the entrepreneur, clearly indicate how your education, expertise, relevant experiences, and network of contacts will make up for any lack of direct experience you have in running this particular kind of business. An example of ineffective framing is when you indicate that you lack experience with this type of business, or when you fail to specify how and why your levels of experience will affect the business’s development.

Prioritizing Problems

Don’t get hung up on something that doesn’t need an immediate solution. Instead, flag it for future consideration and move on. When you return to re-address the issue, it might no longer be a problem or you might have by then figured out a solution.

Process for Developing Business Plans

The business plan development process described next has been extensively tested with entrepreneurship students and has proven to provide the guidance entrepreneurs need to develop a business plan appropriate for their needs: a high power business plan .

Developing a high power business plan has six stages, which can be compared to a process for hosting a dinner for a few friends. A host hoping to make a good impression with their anticipated guests might analyze the situation at multiple levels to collect data on new alternatives for healthy ingredients, what ingredients have the best prices and are most readily available at certain times of year, the new trends in party appetizers, what food allergies the expected guests might have, possible party themes, and so on. This analysis is the Essential Initial Research stage.

In the Business Model stage, the host might construct a menu of items to include with the meal along with a list of decorations to order, music to play, and costume themes to suggest to the guests. The mix of these kinds of elements chosen by the host will aid in the success of the party.

The Initial Business Plan Draft stage is where the host rolls up their sleeves and begins to make some of the food items, puts up some of the decorations, and generally gets everything started for the party.

During this stage, the host will begin to realize that some plans are not feasible and that changes are needed. The required changes might be substantial, like the need to postpone the entire party and ultimately start over in a few months, and others might be less drastic, like the need to change the menu when an invited guest indicates that they can’t eat food containing gluten. These changes are incorporated into the plan during the Making the Business Plan Realistic stage to make it realistic and feasible.

The Making the Plan Appeal to Stakeholders and Desirable to the Entrepreneur stage involves further changes to the party plan to make it more appealing to both the invited guests and to make it a fun experience for the host. For example, the host might learn that some of the single guests would like to bring dates and others might need to be able to bring their children to be able to attend. The host might be able to accommodate those desires or needs in ways that will also make the party more fun for them—maybe by accepting some guests’ offers to bring food or games, or maybe hiring a babysitter to entertain and look after the children.

The final stage— Finishing the Business Plan— involves the host putting all of the final touches in place for the party in preparation for the arrival of the guests.

Essential Initial Research

A business plan writer should analyze the environment in which they anticipate operating at each of the levels of analysis: Societal , Industry , Market , and Firm . This stage of planning is called the Essential Initial Research stage, and it is a necessary first step to better understand the trends that will affect their business and the decisions they must make to lay the groundwork for, which will improve their potential for success.

In some cases, much of this research should be included in the developing business plan as its own separate section to help show readers that there is a market need for the business being considered and that it stands a good chance of being successful.

In other cases, a business plan will be stronger when the components of the research are distributed throughout the business plan to provide support for the outlined plans and strategies outlined. For example, the industry- or market-level research might outline the pricing strategies used by identified competitors, which might be best placed in the Pricing Strategy part of the business plan to support the decision made to employ a particular pricing strategy.

Business Model

Inherent in any business plan is a description of the Business Model chosen by the entrepreneur as the one that they feel will best ensure success. Based upon their analysis from the Essential Initial Research stage, an entrepreneur should determine how each element of their business model—including their revenue streams, cost structure, customer segments, value propositions, key activities, key partners, and so on—might fit together to improve the potential success of their business venture (see Chapter 3 – Business Models ).

For some types of ventures, at this stage an entrepreneur might launch a lean start-up (see the “Lean Start-up” section in Chapter 2 – Essential Initial Research ) and grow their business by continually pivoting, or constantly adjusting their business model in response to the real-time signals they get from the markets’ reactions to their business operations. In many cases, however, an entrepreneur will require a business plan. In those cases, their initial business model will provide the basis for that plan.

Of course, throughout this and all of the stages in this process, the entrepreneur should seek to continually gather information and adjust the plans in response to the new knowledge they gather. As shown in Figure 1 by its enclosure in the Progressive Research box, the business plan developer might need to conduct further research before finishing the business model and moving on to the initial business plan draft.

Initial Business Plan Draft

The Initial Business Plan Draft stage involves taking the knowledge and ideas developed during the first two stages and organizing them into a business plan format. Many entrepreneurs prefer to create a full draft of the business plan with all of the sections, including the front part with the business description, vision, mission, values, value proposition statement, preliminary set of goals, and possibly even a table of contents and lists of tables and figures all set up using the software features enabling their automatic generation. Writing all of the operations, human resources, marketing, and financial plans as part of the first draft ensures that all of these parts can be appropriately and necessarily integrated. The business plan will tell the story of a planned business startup in two ways: 1) by using primarily words along with some charts and graphs in the operations, human resources, and marketing plans and 2) through the financial plan. Both must tell the same story.

The feedback loop shown in Figure 1 demonstrates that the business developer may need to review the business model. Additionally, as shown by its enclosure in the Progressive Research box, the business plan developer might need to conduct further research before finishing the Initial Business Plan Draft stage and moving on to the Making Business Plan Realistic stage.

Making Business Plan Realistic

The first draft of a business plan will almost never be realistic. As the entrepreneur writes the plan, it will necessarily change as new information is gathered. Another factor that usually renders the first draft unrealistic is the difficulty in making certain that the written part—in the front part of the plan along with the operations, human resources, and marketing plans—tells the exact same story as the financial part does. This stage of work involves making the necessary adjustments to the plan to make it as realistic as possible.

The Making Business Plan Realistic stage has two possible feedback loops. The first means going back to the Initial Business Plan Draft stage if the initial business plan needs to be significantly changed before it is possible to adjust it so that it is realistic. The second feedback loop circles back to the Business Model stage if the business developer needs to rethink the business model. As shown in Figure 1 by its enclosure in the Progressive Research box, the business plan developer might need to conduct further research before finishing the Making Business Plan Realistic stage and moving on to the Making Plan Appeal to Stakeholders stage.

Making Plan Appeal to Stakeholders and Desirable to the Entrepreneur

A business plan can be realistic without appealing to potential investors and other external stakeholders, like employees, suppliers, and needed business partners. It might also be realistic (and possibly appealing to stakeholders) without being desirable to the entrepreneur. During this stage, the entrepreneur will keep the business plan realistic as they adjust plans to appeal to potential investors, stakeholders, and themselves.

If, for example, investors will be required to finance the business’s start, some adjustments might need to be relatively extensive to appeal to potential investors’ needs for an exit strategy from the business, to accommodate the rate of return they expect from their investments, and to convince them that the entrepreneur can accomplish all that is promised in the plan. In this case, and in others, the entrepreneur will also need to get what they want out of the business to make it worthwhile for them to start and run it. So, this stage of adjustments to the developing business plan might be fairly extensive, and they must be informed by a superior knowledge of what targeted investors need from a business proposal before they will invest. They also need to be informed by a clear set of goals that will make the venture worthwhile for the entrepreneur to pursue.

The caution with this stage is to balance the need to make realistic plans with the desire to meet the entrepreneur’s goals while avoiding becoming discouraged enough to drop the idea of pursuing the business idea . If an entrepreneur is convinced that the proposed venture will satisfy a valid market need, there is often a way to assemble the financing required to start and operate the business while also meeting the entrepreneur’s most important goals. To do so, however, might require significant changes to the business model.

One of the feedback loops shown in Figure 1 indicates that the business plan writer might need to adjust the draft business plan while ensuring that it is still realistic before it can be made appealing to the targeted stakeholders and desirable to the entrepreneur. The second feedback loop indicates that it might be necessary to go all the way back to the Business Model stage to re-establish the framework and plans needed to develop a realistic, appealing, and desirable business plan. Additionally, this stage’s enclosure in the Progressive Research box suggests that the business plan developer might need to conduct further research.

Finishing the Business Plan

The final stage involves putting the important finishing touches on the business plan so that it will present well to potential investors and others. This involves making sure that the math and links between the written and financial parts are accurate. It involves ensuring that all the needed corrections are made to the spelling, grammar, and formatting. The final set of goals should be written to appeal to the target readers and to reflect what the business plan says. An executive summary should be written and included as a final step.

Chapter Summary

This chapter described the internal and external purposes for business planning. It also explained how business plans must effectively communicate while establishing and building credibility for both the entrepreneur and the venture. The general guidelines for business planning were covered as were some important business planning tools. The chapter concluded with descriptions of the stages of the business development process for effective business planning.

Hindle, K., & Mainprize, B. (2006). A systematic approach to writing and rating entrepreneurial business plans. The Journal of Private Equity, 9(3), 7-23. ↵
Ibid. ↵

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

How To Write A Business Plan (2024 Guide)

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business.

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business, an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Every year, thousands of new businesses see the light of the day. One look at the World Bank's Entrepreneurship Survey and database shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several other statistics expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all.

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%) don't have a formal business plan in place.

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained.

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes.

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals.
Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest.

Now let's look at the various types involved in business planning.

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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.

Here’s an overview of a few fundamental types of business plans.

Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments.
Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them.

Here are the key elements of a good business plan:

Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.
Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time.
Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

Create a business plan to determine your company's direction, obtain financing, and attract investors.
Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success.

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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Fundamental Principles of Strategic & Business Planning Models

During the planning process, a small business's owner and team forecast -- or model -- the company's future in terms of the strategic actions that will be taken in order to reach the company's goals, and of the financial results of those actions. Although companies use a number of different planning approaches, models of a company's future results are based on a few fundamental principles.

Start With a Vision

The first step in planning is to create your long-term objectives -- the vision for what you intend your company to accomplish in the future. The vision is critical because it defines the long-term direction for the company. Some business owners have grand visions. Others have more modest ones. Either way, the vision is the ultimate destination you hope to reach. With that in place, planning becomes a process of devising the action steps to reach the desired destination.

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Assessment of the Current Position

During the annual planning process, the owner and management team of a business identify the strengths and weaknesses of the company in comparison to major competitors. They seek to mitigate or eliminate the weaknesses over time and take advantage of the company's strengths. Planning also requires an assessment of the major issues or challenges facing the company, for example changes in government regulation that will affect the company's operations. Strategies are then devised to minimize any negative effects from these issues or challenges.

More For You

How to put a business plan in motion, how to set short-term and long-term goals for a business, fun ways to roll out a strategic plan, how to project sales numbers, strategic analysis of a company, measurable goals and metrics.

Goal setting is a fundamental element of planning. Without measurable goals in place, it is difficult to see whether the company is making progress toward the long-term objective, the realization of the owner's vision. Some goals are quantifiable, such as the percentage increase in revenue for the upcoming year. Others are more qualitative, but still measurable. A goal of improving customer service can be measured by a decline in customer complaints. Along with the larger goals, smaller ones called metrics are also included in the plan. These show what must be accomplished to reach the larger goals. Increased sales could come about because customer traffic goes up, or because the average amount purchased per customer increases. Goals for both customer traffic and average purchase are set as well.

Based on Sound Assumptions

The more a small-business owner understands the environment in which the company operates, the more realistic the plan will be. The assumptions are models of what the environment will look like. For example, the company would use an assumption about the growth of the industry and the general economy. Another assumption would be about the number and strengths of competitors the company will go up against in the upcoming year. If the assumptions turn out to be incorrect, the company will probably not reach its planned revenue and profit goals. For example, the company might be planning on having record sales for the next year, but the entry of two new strong competitors was not taken into account when the goals were set.

Adjust to Changes in the Environment

Actual results are likely to vary from what had been forecast because the business environment changes during the year. It can be difficult to predict how customers will respond to the company's products or services and its marketing strategies. During the year the owner may decide to adjust strategies or even adjust the forecast if the changes in the environment are significant. This fundamental principle is flexibility. The plan is continually evolving, not something that is set in stone at the conclusion of the planning process.

ManagementHelp.org: Basic Overview of Various Strategic Planning Models
Inc.: How to Write a Marketing Plan

Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."

14 Reasons Why You Need a Business Plan

Female entrepreneur holding a pen and pointing to multiple sticky notes on the wall. Presenting the many ways having a business plan will benefit you as a business owner.

10 min. read

Updated May 10, 2024

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There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed.

You don’t have to just take our word for it. Studies have proven that companies that plan and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience cash flow crises that threaten to close them down.

2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture.

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality.

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money.

3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations.

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans.

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

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4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones.

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

If there is a market for your product or service
Who your target audience is
How you will gain an edge over the current competition
If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together for your business plan. (The other two are your balance sheet and your income statement (P&L).

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.

8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

What is your competition doing well? What are they doing poorly?
What can you do to set yourself apart?
What can you learn from them?
How can you make your business stand out?
What key business areas can you outcompete?
How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete.

9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind.

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business.

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers.

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc.

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there.

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale.

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Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one.

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

6. You’ll make big spending decisions with confidence
7. You’re more likely to catch critical cash flow challenges early

Male and female entrepreneur sitting at a table with two other team members. Reviewing a business plan outline to discuss the main components they need to cover.

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Module 3: Planning and Mission

The planning cycle, learning outcomes.

Explain the stages of the planning cycle.
Explain why the planning cycle is an essential part of running a business.

Organizations have goals they want to achieve, so they must consider the best way of reaching their goals and must decide the specific steps to be taken. However, this is not a linear, step-by-step process. It is an iterative process with each step reconsidered as more information is gathered. As organizations go through the planning, they may realize that a different approach is better and go back to start again.

Remember that planning is only one of the management functions and that the functions themselves are part of a cycle. Planning, and in fact all of the management functions, is a cycle within a cycle. For most organizations, new goals are continually being made or existing goals get changed, so planning never ends. It is a continuing, iterative process.

In the following discussion, we will look at the steps in the planning cycle as a linear process. But keep in mind that at any point in the process, the planner may go back to an earlier step and start again.

Stages in the Planning Cycle

The stages in the planning cycle

Define objectives

The first, and most crucial, step in the planning process is to determine what is to be accomplished during the planning period. The vision and mission statements provide long-term, broad guidance on where the organization is going and how it will get there. The planning process should define specific goals and show how the goals support the vision and mission. Goals should be stated in measurable terms where possible. For example, a goal should be “to increase sales by 15 percent in the next quarter” not “increase sales as much as possible.”

Develop premises

Planning requires making some assumptions about the future. We know that conditions will change as plans are implemented and managers need to make forecasts about what the changes will be. These include changes in external conditions (laws and regulations, competitors’ actions, new technology being available) and internal conditions (what the budget will be, the outcome of employee training, a new building being completed). These assumptions are called the plan premises. It is important that these premises be clearly stated at the start of the planning process. Managers need to monitor conditions as the plan is implemented. If the premises are not proven accurate, the plan will likely have to be changed.

Evaluate alternatives

There may be more than one way to achieve a goal. For example, to increase sales by 12 percent, a company could hire more salespeople, lower prices, create a new marketing plan, expand into a new area, or take over a competitor. Managers need to identify possible alternatives and evaluate how difficult it would be to implement each one and how likely each one would lead to success. It is valuable for managers to seek input from different sources when identifying alternatives. Different perspectives can provide different solutions.

Identify resources

Next, managers must determine the resources needed to implement the plan. They must examine the resources the organization currently has, what new resources will be needed, when the resources will be needed, and where they will come from. The resources could include people with particular skills and experience, equipment and machinery, technology, or money. This step needs to be done in conjunction with the previous one, because each alternative requires different resources. Part of the evaluation process is determining the cost and availability of resources.

Plan and implement tasks

Management will next create a road map that takes the organization from where it is to its goal. It will define tasks at different levels in the organizations, the sequence for completing the tasks, and the interdependence of the tasks identified. Techniques such as Gantt charts and critical path planning are often used to help establish and track schedules and priorities.

Determine tracking and evaluation methods

It is very important that managers can track the progress of the plan. The plan should determine which tasks are most critical, which tasks are most likely to encounter problems, and which could cause bottlenecks that could delay the overall plan. Managers can then determine performance and schedule milestones to track progress. Regular monitoring and adjustment as the plan is implemented should be built into the process to assure things stay on track.

Practice Question

The planning cycle: essential part of running a business.

Following the planning cycle process assures the essential aspects of running a business are completed. In addition, the planning process itself can have benefits for the organization. The essential activities include the following:

Maintaining organizational focus: Defining specific goals requires managers to consider the vision, mission, and values of the organization and how these will be operationalized. The methods and selected goals can demonstrate that the vision, mission, and values statements are working documents that are not just for show but prescribe activities.
Encouraging diverse participation: Planning activities provide an opportunity for input from different functions, departments, and people. Some organizations establish planning committees that intentionally include people from diverse backgrounds to bring new perspectives into the planning process.
Empowering and motivating employees: When people are involved in developing plans they will be more committed to the plans. Allowing diverse input into the planning cycle empowers people to contribute and motivates them to support the outcomes.

PRactice Question

There are several stages, or steps, in the planning process. It is not unusual to have to repeat steps as conditions change. This process is essential to a business to maintain focus, gather diverse opinions, and empower and motivate employees.

The Planning Cycle. Authored by : John/Lynn Bruton and Lumen Learning. License : CC BY: Attribution
Image: Stages in the Planning Cycle. Authored by : Lumen Learning. License : CC BY: Attribution

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Business Plans

What Is Business Planning?

Why Business Planning Isn't Just for Startups

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Morsa Images / Getty Images

Business planning takes place when the key stakeholders in a business sit down and flesh out all the goals , strategies, and actions that they envision taking to ensure the business’s survival, prosperity, and growth.

Here are some strategies for business planning and the ways it can benefit your business.

Business planning can play out in many different ways. Anytime upper management comes together to plan for the success of a business, it is a form of business planning. Business planning commonly involves collecting ideas in a formal business plan that outlines a summary of the business's current state, as well as the state of the broader market, along with detailed steps the business will take to improve performance in the coming period.

Business plans aren't just about money. The business plan outlines the general planning needed to start and run a successful business, and that includes profits, but it also goes beyond that. A plan should account for everything from scoping out the competition and figuring out how your new business will fit into the industry to assessing employee morale and planning for how to retain talent.

How Does Business Planning Work?

Every new business needs a business plan —a blueprint of how you will develop your new business, backed by research, that demonstrates how the business idea is viable. If your new business idea requires investment capital, you will have a better chance of obtaining debt or equity financing from financial institutions, angel investors , or venture capitalists if you have a solid business plan to back up your ideas.

Businesses should prepare a business plan, even if they don't need to attract investors or secure loans.

Post-Startup Business Planning

The business plan isn’t a set-it-and-forget-it planning exercise. It should be a living document that is updated throughout the life cycle of your business.

Once the business has officially started, business planning will shift to setting and meeting goals and targets. Business planning is most effective when it’s done on a consistent schedule that revisits existing goals and projects throughout the year, perhaps even monthly. In addition to reviewing short-term goals throughout the year, it's also important to establish a clear vision and lay the path for your long-term success.

Daily business planning is an incredibly effective way for individuals to focus on achieving both their own goals and the goals of the organization.

Sales Forecasting

The sales forecast is a key section of the business plan that needs to be constantly tracked and updated. The sales forecast is an estimate of the sales of goods and services your business is likely to achieve over the forecasted period, along with the estimated profit from those sales. The forecast should take into account trends in your industry, the general economy, and the projected needs of your primary customers.

Cash Flow Analysis

Another crucial component of business planning is cash flow analysis. Avoiding extended cash flow shortages is vital for businesses, and many business failures can be blamed on cash flow problems.

Your business may have a large, lucrative order on the books, but if it can't be invoiced until the job is completed, then you may run into cash flow problems. That scenario can get even worse if you have to hire staff, purchase inventory, and make other expenditures in the meantime to complete the project.

Performing regular cash flow projections is an important part of business planning. If managed properly, cash flow shortages can be covered by additional financing or equity investment.

Business Contingency Planning

In addition to business planning for profit and growth, your business should have a contingency plan. Contingency business planning (also known as business continuity planning or disaster planning) is the type of business planning that deals with crises and worst-case scenarios. A business contingency plan helps businesses deal with sudden emergencies, unexpected events, and new information that could disrupt your business.

The goals of a contingency plan are to:

Provide for the safety and security of yourself, your employees, and your customers in the event of a fire, flood, robbery, data breach, illness, or some other disaster
Ensure that your business can resume operations after an emergency as quickly as possible

Business Succession Planning

If your business is a family enterprise or you have specific plans for who you want to take over in the event of your retirement or illness, then you should have a plan in place to hand over control of the business . The issues of management, ownership, and taxes can cause a great deal of discord within families unless a succession plan is in place that clearly outlines the process.

Key Takeaways

Business planning is when key stakeholders review the state of their business and plan for how they will improve the business in the future.
Business planning isn't a one-off event—it should be an ongoing practice of self-assessment and planning.
Business planning isn't just about improving sales; it can also address safety during natural disasters or the transfer of power after an owner retires.

17.2 The Planning Process

Outline the planning and controlling processes.

Planning is a process. Ideally it is future oriented, comprehensive, systematic, integrated, and negotiated. 11 It involves an extensive search for alternatives and analyzes relevant information, is systematic in nature, and is commonly participative. 12 The planning model described in this section breaks the managerial function of planning into several steps, as shown in Exhibit 17.3 . Following this step-by-step procedure helps ensure that organizational planning meets these requirements.

Step 1: Developing an Awareness of the Present State

According to management scholars Harold Koontz and Cyril O’Donnell, the first step in the planning process is awareness. 13 It is at this step that managers build the foundation on which they will develop their plans. This foundation specifies an organization’s current status, pinpoints its commitments, recognizes its strengths and weaknesses, and sets forth a vision of the future. Because the past is instrumental in determining where an organization expects to go in the future, managers at this point must understand their organization and its history. It has been said—“The further you look back, the further you can see ahead.” 14

Step 2: Establishing Outcome Statements

The second step in the planning process consists of deciding “where the organization is headed, or is going to end up.” Ideally, this involves establishing goals. Just as your goal in this course might be to get a certain grade, managers at various levels in an organization’s hierarchy set goals. For example, plans established by a university’s marketing department curriculum committee must fit with and support the plans of the department, which contribute to the goals of the business school, whose plans must, in turn, support the goals of the university. Managers therefore develop an elaborate network of organizational plans, such as that shown in Exhibit 17.4 , to achieve the overall goals of their organization.

Goal vs. Domain Planning

Outcome statements can be constructed around specific goals or framed in terms of moving in a particular direction toward a viable set of outcomes. In goal planning , people set specific goals and then create action statements. 15 For example, freshman Kristin Rude decides that she wants a bachelor of science degree in biochemistry (the goal). She then constructs a four-year academic plan that will help her achieve this goal. Kristin is engaging in goal planning. She first identifies a goal and then develops a course of action to realize her goal.

Another approach to planning is domain/directional planning , in which managers develop a course of action that moves an organization toward one identified domain (and therefore away from other domains). 16 Within the chosen domain may lie a number of acceptable and specific goals. For example, high-school senior Neil Marquardt decides that he wants to major in a business-related discipline in college. During the next four years, he will select a variety of courses from the business school curriculum yet never select a major. After selecting courses based on availability and interest, he earns a sufficient number of credits within this chosen domain that enables him to graduate with a major in marketing. Neil never engaged in goal planning, but in the end he will realize one of many acceptable goals within an accepted domain.

The development of the Post-it® product by the 3M Corporation demonstrates how domain planning works. In the research laboratories at 3M, efforts were being made to develop new forms and strengths of cohesive substances. One result was cohesive material with no known value because of its extremely low cohesive level. A 3M division specialist, Arthur L. Fry, frustrated by page markers falling from his hymn book in church, realized that this material, recently developed by Spencer F. Silver, would stick to paper for long periods and could be removed without destroying the paper. Fry experimented with the material as page markers and note pads—out of this came the highly popular and extremely profitable 3M product Scotch Post-it®. Geoff Nicholson, the driving force behind the Post-it® product, comments that rather than get bogged down in the planning process, innovations must be fast-tracked and decisions made whether to continue or move on early during the product development process. 17

Situations in which managers are likely to engage in domain planning include (1) when there is a recognized need for flexibility, (2) when people cannot agree on goals, (3) when an organization’s external environment is unstable and highly uncertain, and (4) when an organization is starting up or is in a transitional period. In addition, domain planning is likely to prevail at upper levels in an organization, where managers are responsible for dealing with the external environment and when task uncertainty is high. Goal planning (formulating goals compatible with the chosen domain) is likely to prevail in the technical core, where there is less uncertainty.

Hybrid Planning

Occasionally, coupling of domain and goal planning occurs, creating a third approach, called hybrid planning . In this approach, managers begin with the more general domain planning and commit to moving in a particular direction. As time passes, learning occurs, uncertainty is reduced, preferences sharpen, and managers are able to make the transition to goal planning as they identify increasingly specific targets in the selected domain. Movement from domain planning to goal planning occurs as knowledge accumulates, preferences for a particular goal emerge, and action statements are created.

Consequences of Goal, Domain, and Hybrid Planning

Setting goals not only affects performance directly, but also encourages managers to plan more extensively. That is, once goals are set, people are more likely to think systematically about how they should proceed to realize the goals. 18 When people have vague goals, as in domain planning, they find it difficult to draw up detailed action plans and are therefore less likely to perform effectively. When studying the topic of motivation, you will learn about goal theory. Research suggests that goal planning results in higher levels of performance than does domain planning alone. 19

Step 3: Premising

In this step of the planning process, managers establish the premises, or assumptions, on which they will build their action statements. The quality and success of any plan depends on the quality of its underlying assumptions. Throughout the planning process, assumptions about future events must be brought to the surface, monitored, and updated. 20

Managers collect information by scanning their organization’s internal and external environments. They use this information to make assumptions about the likelihood of future events. As Kristin considers her four-year pursuit of her biochemistry major, she anticipates that in addition to her savings and funds supplied by her parents, she will need a full-time summer job for two summers in order to cover the cost of her undergraduate education. Thus, she includes finding full-time summer employment between her senior year of high school and her freshman year and between her freshman and sophomore years of college as part of her plan. The other two summers she will devote to an internship and finding postgraduate employment—much to mom and dad’s delight! Effective planning skills can be used throughout your life. The plan you develop to pay for and complete your education is an especially important one.

Step 4: Determining a Course of Action (Action Statements)

In this stage of the planning process, managers decide how to move from their current position toward their goal (or toward their domain). They develop an action statement that details what needs to be done, when, how, and by whom. The course of action determines how an organization will get from its current position to its desired future position. Choosing a course of action involves determining alternatives by drawing on research, experimentation, and experience; evaluating alternatives in light of how well each would help the organization reach its goals or approach its desired domain; and selecting a course of action after identifying and carefully considering the merits of each alternative.

Step 5: Formulating Supportive Plans

The planning process seldom stops with the adoption of a general plan. Managers often need to develop one or more supportive or derivative plans to bolster and explain their basic plan. Suppose an organization decides to switch from a 5-day, 40-hour workweek (5/40) to a 4-day, 40-hour workweek (4/40) in an attempt to reduce employee turnover. This major plan requires the creation of a number of supportive plans. Managers might need to develop personnel policies dealing with payment of daily overtime. New administrative plans will be needed for scheduling meetings, handling phone calls, and dealing with customers and suppliers.

Planning, Implementation, and Controlling

After managers have moved through the five steps of the planning process and have drawn up and implemented specific plans, they must monitor and maintain their plans. Through the controlling function (to be discussed in greater detail later in this chapter), managers observe ongoing human behavior and organizational activity, compare it to the outcome and action statements formulated during the planning process, and take corrective action if they observe unexpected and unwanted deviations. Thus, planning and controlling activities are closely interrelated (planning ➨ controlling ➨ planning . . .). Planning feeds controlling by establishing the standards against which behavior will be evaluated during the controlling process. Monitoring organizational behavior (the control activity) provides managers with input that helps them prepare for the upcoming planning period—it adds meaning to the awareness step of the planning process.

Influenced by total quality management (TQM) and the importance of achieving continuous improvement in the processes used, as well as the goods and services produced, organizations such as IBM-Rochester have linked their planning and controlling activities by adopting the Deming cycle (also known as the Shewhart cycle).

It has been noted on numerous occasions that many organizations that do plan fail to recognize the importance of continuous learning. Their plans are either placed on the shelf and collect dust or are created, implemented, and adhered to without a systematic review and modification process. Frequently, plans are implemented without first measuring where the organization currently stands so that future comparisons and evaluations of the plan’s effectiveness cannot be determined. The Deming cycle , shown in Exhibit 17.6 , helps managers assess the effects of planned action by integrating organizational learning into the planning process. The cycle consists of four key stages: (1) Plan—create the plan using the model discussed earlier. (2) Do—implement the plan. (3) Check—monitor the results of the planned course of action; organizational learning about the effectiveness of the plan occurs at this stage. (4) Act—act on what was learned, modify the plan, and return to the first stage in the cycle, and the cycle begins again as the organization strives for continuous learning and improvement.

Concept Check

What are the five steps in the planning process?
What is the difference between goal, domain, and hybrid planning?
How are planning, implementation, and controlling related?

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Book title: Principles of Management
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Location: Houston, Texas
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Management Notes

Principles of Planning – Concept of Planning | Principles of Management

Principles of planning.

Table of Contents

Principle of Contribution to Objective

Developing and facilitating the realization of organizational goals and objectives is the aim and purpose of plans, and their components. To accomplish organizational objectives more effectively and economically, long-term plans need to be interwoven with medium-term ones, which, in turn, need to be linked to short-term ones.

Principle of Limiting Factors

The factors that limit the development of alternative plans, strategies, policies, procedures, and standards must be taken into consideration when developing alternative plans, strategies, policies, procedures and standards.

Principle of Pervasiveness of Planning

All levels of management are involved in planning. Long-range planning and strategic planning are the responsibility of top management, while intermediate and short-range planning are the concerns of middle and operative management.

Principle of Navigational Change

To maintain a course towards a desired goal, managers should periodically check on events and redraw plans. Navigators must continuously check whether their ships are following the right path in the vast ocean to reach the destination in time. A manager should also ensure that his plans are being implemented properly.
When unexpected events occur, he should change the direction of his plans. Plans are more effective if they contain a certain degree of flexibility. Managers are responsible for adapting and changing plans in response to a constantly changing environment that cannot be predicted in advance.

Principle of flexibility

Organizational plans should incorporate flexibility. The possibility of error in forecasting and decision-making, as well as the uncertainty of the future, force managers to be flexible in their planning.
Flexibility means management should be able to modify a plan as circumstances change, without delay or cost, so that activities keep moving towards established goals. An unexpected slump in demand for a product will therefore require changes to both the sales plan and the production plan.
Only when these plans possess the characteristics of flexibility can they be changed. Planning with flexibility in mind makes it easier to adjust plans to future uncertainties or changing environments.

Budgeting supports the planning process by encouraging all of the following activities except

a. increasing the motivation of managers and employees by providing agreed-upon expectations
b. requiring all organizational units to establish their goals for the upcoming period
c. directing and coordinating operations during the period
d. improving overall decision making by considering all viewpoints, options, and cost reduction possibility.

Following are some activities that budgeting encourages as part of the planning process:

Preparing a budget for the period and setting financial goals.
The allocation of resources to achieve these objectives and goals.
Finding out how much it will cost to achieve these goals and objectives.
Establishing goals and objectives and monitoring their progress.
Assessing potential financial risks and addressing them.
Staying on track with financial goals and objectives by adjusting plans and strategies as needed.

Budgeting does not typically support the coordination and management of operations during the period. Operational management is typically responsible for this.

In order to reach financial goals and objectives, budgeting is an integral part of any organization’s planning process. The purpose of a budget is to allocate resources and track progress towards reaching financial goals within an organization. Budgeting allows the budget to be adjusted in order to address possible financial challenges and risks throughout the period. By doing so, the financial goals and objectives of the organization can be maintained even in the face of unexpected obstacles.

Further, budgeting encourages the tracking and monitoring of financial performance, which makes it possible to quickly identify areas of underperformance or overperformance. In order to optimize the organization’s financial performance, plans and strategies must be adjusted timely.

Using a budget to establish financial goals and objectives, allocate resources, track progress, and identify and address potential financial risks or challenges is a key part of the planning process.

Which Of The Following Is Not A Step In The Strategic Planning Process?
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Eight Key Principles for a Successful LMS Implementation

By Kathleen Bosworth

I have had the pleasure of implementing hundreds learning management systems for organisations of all types and sizes. The ultimate measure of success client success. A project director once impressed upon me that his job depended on a successful implementation and it is something I remember to this day.

Ensuring the success of an LMS requires more than just project management and communication plans. There are strategic considerations that will drive adoption, engagement, and long-term value.

Here are the key principles I have found are important for a successful LMS implementation:

1. Define how the LMS will Align with Your Organisational Goals

As part of the implementation planning, it is crucial to define how the LMS will support your broader business objectives. An LMS implementation must be designed with the outcome in mind; whether your goals are improving performance, ensuring compliance, or fostering a culture of continuous learning. A well-aligned LMS is a strategic asset that directly supports key organisational priorities.

How to do this:

Create learning pathways that are directly connected to business goals and team objectives.
Design how to track the impact of learning on job performance and team objectives.

2. Prioritise the Learner Experience

User adoption is one of the most important success factors in any LMS implementation. If the system is difficult to navigate or the content is unengaging, learners are less likely to use it. A focus on user experience can make the LMS an intuitive and enjoyable part of the employee experience.

Key considerations:

Ensure the interface is simple, clean, and user-friendly.
Incorporate features like microlearning to make content more accessible and engaging.
Personalise learning paths to cater to different roles, departments, or individual skill gaps.

3. Plan for Stakeholder LMS needs

Depending on the solution design and implementation, there are other important stakeholders to consider: manager, subject matter experts or course administrators.

3.1 Equip Managers to Support Learning Initiatives in the LMS

Your Managers will be the champions of the learning culture, monitoring team progress, and linking learning outcomes to team objectives.

Key strategies:

Cater for reporting requirements: This allows managers to have meaningful conversations with their team members about development opportunities.
Work with managers to align learning with team objectives: Encourage managers to integrate learning into individual development plans (IDPs) and team performance reviews. This helps make learning an ongoing part of performance management.
Involve managers in content selection: Managers should have a say in what learning resources are most relevant to their teams’ needs, ensuring that the content is directly aligned with the skills required to achieve business goals.

3.2 Empower Subject Matter Experts (SME’s) and Course Administrators with Autonomy and Insights

Subject matter experts (SMEs) and course administrators are the backbone of an LMS, essential in developing content, responsible for ensuring smooth operations, maintaining content, and troubleshooting user issues. The LMS Project Team needs to ensure SME’s and course administrators have right level of autonomy to enable them to manage the LMS more efficiently and keep the learning experience seamless for users.

SME and Course Administrator Empowerment Tactics:

Content creation tools: Provide SMEs and course administrators with user-friendly content creation tools, allowing them to design, upload, and manage learning materials with ease.
Automation of routine tasks: Design automation for repetitive tasks like course enrolments, scheduling, and reminder notifications.
Create flexible content management processes: Plan how SME’s and course administrators will have the autonomy to update or adjust content based on learner feedback or business changes without needing excessive layers of approval

4. Streamline how the LMS will exchange data with existing systems (systems integration)

Your LMS will need to include people data from your HR system and it will be beneficial to streamline the login process through single sign-on. How people data in the LMS is updated after the initial implementation will depend on several factors, including the state or accuracy of the data in the HR system and the actual number of people changes that happens in a day. If there are only 1 or 2 people data changes in a week, it may take more time to set up an automations than spending the 2 minutes each week making those people data updates in the LMS. There are many other considerations depending on your situation.

Data strategies:

Implement Single Sign-On (SSO) for ease of access.
Consider all aspects of the accuracy and quantity of the source people data when making decisions on this data exchange.

5. Focus on Content Curation and Relevance

The success of your LMS hinges on the quality of the learning content it delivers. To engage your learners effectively, the content must be relevant, practical, and aligned with their needs. Develop a content strategy ensures that employees are provided with materials that are timely, targeted, and engaging. When dealing with a large volume of learning content, it is more effective to implement a phased or staged approach so that learners are not overwhelmed.

Best practices:

Offer a blend of in-house developed content and third-party materials to cover a wide range of learning needs.
Keep content updated and aligned organisational goals.
Divest content development to SME’s and course administrators for quicker and more accurate learning content.
Use microlearning techniques to deliver content in small, digestible pieces.

6. Leverage LMS Reports and/or Business Intelligence for Continuous Improvement

Review exiting LMS reports and compare them to your administrator and manager reporting requirements.

Data Reporting Decisions:

Use LMS reporting analytics to track engagement, completion rates, and skill gaps.
Determine whether the LMS reports are sufficient or whether business intelligence tools, such as Power BI, is needed to combine LMS data with other system data.

7. Develop a Communication Plan

The successful implementation of an LMS relies on clear, consistent communication to ensure that all stakeholders are informed, engaged, and prepared for the transition. A

Communication Strategies for LMS Implementation:

Create a Phased Communication Timeline
Tailor Messages for Different Stakeholders
Highlight the Benefits for Each Audience
Leverage Multiple Communication Channels
Involve Leadership and Champions
Conduct Pre-Launch Awareness Campaigns
Provide Regular Updates and Status Reports to key stakeholders

8. Develop a Training and Support Plan

A Training Plan will ensure that stakeholders have the knowledge to use the LMS effectively. Ongoing communication keeps users engaged, while training ensures that they have the knowledge and resources to fully utilise the system. LMS administrator training should be provided by the LMS supplier.

Stakeholder Training Strategies:

Provide stakeholder training: Equip stakeholders, such as managers, SME’s or course administrators to become champions who can provide frontline support to end users.
Create a Long-Term Support Plan: Develop a roadmap that includes regular feature updates, user training sessions, and ongoing feedback mechanisms.
Provide Knowledge Resources: Create a central repository of learning materials such as user manuals, video tutorials, and FAQs. This ensures that users can access support content on-demand.

By focusing on these seven key principles, you can ensure that your successful LMS implementation meets its functional objectives and adds value in driving employee engagement, improving performance, and fostering a culture of learning.

WorkPlan has extensive LMS implementation experience to ensure your success.

Phone: 1300 726 708

Email: [email protected]

Web: https://workplan.com.au

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Lean Business Planning

5 Principles of Business Planning

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10 Principles of Planning in Management

Principles of Planning in Management

Contribution to Objectives Principle

Efficiency Principle

Flexibility Principle

Commitment Principle

Timing Principle

Pervasive Principle

Principle of Alternatives

Limiting Factor Principle

Comparative Strategies Principle

Acceptance Principle

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15 Principles of Planning in Management (With Examples)

The 15 Principles of Planning in Management

Principle 1: Division of Work

Principle 2: Authority and Responsibility

Principle 3: Discipline

Principle 4: Unity of Command

Principle 5: Unity of Direction

Principle 6: Subordination of Individual Interest

Principle 7: Remuneration

Principle 8: Centralization

Principle 9: Scalar Chain

Principle 10: Order

Principle 11: Equity

Principle 12: Stability of Tenure

Principle 13: Initiative

Principle 14: Cost-Benefit Analysis

Principle 15: Esprit de Corps

Objectives of Planning in Management

Types of Planning in Principles of Management

1. On the Basis of Hierarchy or Levels in the Organization

2. On the Basis of Use

3. On the Basis of Flexibility

4. On the Basis of Time

5. On the Basis of Functional Areas

The Final Word

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What Is a Business Plan?

Key Takeaways

2 Types of Business Plans

Why Do Business Plans Fail?

How Often Should a Business Plan Be Updated?

What Does a Lean Startup Business Plan Include?

2 Developing a Business Plan

Purposes for Developing Business Plans

Internal Purposes

External Purposes

Business Plan Development Principles [1]

General Guidelines for Developing Business Plans

As You Write Your Business Plan

Useful Resources for Business Planning

Library Resources

Employee compensation calculators

Existing business plans

Business Plan Development Tools

The Ratchet Effect

The Magic Formula

Context and Framing

Prioritizing Problems

Process for Developing Business Plans

Essential Initial Research

Business Model

Initial Business Plan Draft

Making Business Plan Realistic

Making Plan Appeal to Stakeholders and Desirable to the Entrepreneur

Finishing the Business Plan

Chapter Summary

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