Business Planning

Importance of a business plan

A good business plan is critical for any business, providing a roadmap for achieving success and ensuring that all stakeholders are aligned and working towards the same goals. It helps businesses make more informed decisions, secure funding, and track their progress over time. Here are some points summarising the importance of a business plan:

• A business plan helps a company track its growth and stay in line with its stated business objectives. If something is going off track, the managers can review the business plan and steer things back in the right direction.
• A good business plan notifies investors how the business is operated and if it is worth investing in. It attracts investors and sells them the idea of your business.
• A business plan provides a unified working structure among employees and business owners. It keeps employees and business owners on the same page about strategic actions needed to be taken.
• A well-crafted business plan can help startups attract investment or get loans without a proven financial record. It provides investors and lenders with an understanding of the company's goals, strategies, and financial projections.

Elements of a good business plan

A business plan should include key elements that help to provide a complete overview of the business and its plans for success. Here are some important elements that should be included in a typical business plan:

1. Executive Summary
2. Business Description
3. Market Analysis
4. Products and Services
5. Marketing and Sales Strategy
6. Management and Organization
7. Financial Projections
8. Funding Requirements
9. Appendices

1. Executive summary

This business planning element provides a brief description of the business. It gives information on the business leadership, its employees, operations, and location. It also provides the business mission statement, goals, and vision.

2. Company description

This section provides a detailed description of the business, including its mission, vision, and goals. It should also include information about the industry and target market.

3. Market analysis

Good business planning requires a well-written market analysis showing demand and supply. A SWOT analysis provides detailed information on business strengths and weaknesses along with details on the business competitor and market opportunities available.

An example of a good business plan market analysis is presented in a SWOT analysis carried out by a local shirt production company called 69 Shirts (a fictional company).

Table 1. SWOT analysis example

4. Products and services offered

This element provides a description of the products and services offered by a business. It includes production information, information on patents (if available), research and development, product or services pricing, and consumer benefits.

5. Marketing and sales strategy

This element provides information on how the business intends to distribute its products and services, for example, what marketing strategies and channels they will use. Fundamentally, it shows how a business intends to build and keep its audience.

Again, let's take the example of 69 Shirts. Here's a possible marketing strategy:

• Using social media marketing and influencer marketing - the business aims to reach the audience by telling the story behind the products and how they can help the customers. The company also focuses on price, product distinction, product promotion, and customers’ feelings.
• Running a guerrilla marketing campaign in train stations and on public transport - this is done with the aim of letting people know as much as possible about the products and how beneficial and memorable it will be for them to own the product.

6. Management and organisation

This section should describe the management team and the organization's structure, including the roles and responsibilities of each team member.

7. Financial plans

Here, the business projections and estimates are included for startups, and for an established business, balance sheets, financial statements, and important financial information should be added. It should also include a break-even analysis, which shows the level of sales needed to cover all expenses. Well-prepared financial calculations can attract investors, banks, and venture capitalists.

8. Funding

If the business needs funding, this section should outline the funding requirements, including how much funding is needed, what the funds will be used for, and how the business plans to repay the funding.

9. Appendices

This section should include any additional information that is relevant to the business plan, such as market research reports, product specifications, and legal documents.

Plan length varies, as does the type of plan, but a document usually ranges from 15 to 20 pages.

Business planning process

A business plan is just one step of the business planning process. The steps of the business planning process below will help you understand it:

1. Define the business goals: The first step in business planning is to define the goals that the business wants to achieve. These goals should be specific, measurable, achievable, relevant, and time-bound.
2. Conduct market research: The next step is to conduct market research to understand the target market, competition, and industry trends. This research can help the business identify opportunities and threats, and refine its strategy accordingly.
3. Identify resources: The third step is to identify the resources that the business needs to achieve its goals. These resources could include finances, personnel, equipment, and facilities.
4. Develop strategies: Based on market research and resource assessment, the business can develop strategies to achieve its goals. These strategies should be aligned with the business's strengths and opportunities, and address any weaknesses or threats.
5. Create a business plan: The strategies can then be translated into a formal business plan, which outlines the business's core activities, objectives, and roadmap to achieving its goals. The business plan should include detailed information about the products or services, market analysis, marketing and sales strategy, as well as financial projections.
6. Implement the plan: Once the business plan is complete, the next step is to implement it. This involves executing the strategies and tactics outlined in the plan, and monitoring progress towards the business goals.
7. Evaluate and adjust: The final step is to evaluate the progress towards the business goals and adjust the plan as needed. This ensures that the business remains on track to achieve its goals and adapts to changes in the market or business environment.

Advantages and disadvantages of a business plan

While creating a business plan is a critical step in launching and running a successful business, it's important for managers and business owners to remember that there can be drawbacks. Advantages and disadvantages of a business plan are as follows: