Understanding the Succession Planning Process
The process by which you train and prepare employees to fill crucial roles within an organization is known as succession planning. This process ensures that the business continues its day-to-day operations as usual. This article will highlight the steps in the succession planning process.
No matter the type or size of your organization, succession planning is essential to continue to have your business run smoothly upon your departure. It’s important to identify your successor well in advance so that they may be properly trained for the role. This training may occur years in advance of the anticipated exit from the company. You may identify someone who needs to start at a lower position within the company and work their way up through the ranks to achieve a thorough training and knowledge base or you may have to cross-train them for several different roles.
Identify the Positions Needing Successors
Although succession planning usually refers to high-leadership roles in a company, it can apply to other roles as well. One of the first steps in this process is to recognize which roles within your company will need a successor if the current employee leaves. You’ll want to analyze which positions impact the revenue or growth of the company. This profit could be compromised if a successor is not put into place.
Informing Key Players
You’ll want to have a discussion with all the key players, those currently in a role identified as needing a successor and those who you would like to groom to take the role over. You should make sure that everyone is agreeable and on the same page. The current employee should be willing to train their successor so that a seamless transition can take place once the time comes. The person identified as the successor should be motivated to learn the role they will step into one day and a timeline should be established. Typically these identified successors feel an increase of pride and a greater investment in the company, according to The Balance website.
Internal vs. External Successors
Identifying an internal successor has multiple benefits. They know the company’s culture, have a sense of loyalty from currently working there and have been through the basic training program. In addition, they know colleagues internally and may also know some of the external clients as well. In cases where a suitable internal employee can’t be identified, an external one may have to be. This will entail more effort and time to be invested in finding and training a suitable candidate.
Succession Planning Benefit
Succession planning is a key necessity in running an efficient business. You want to have a plan for the future of the company, and identifying and training successors to step into key roles will ensure that your organization doesn’t miss a beat.
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- Planning Process
Planning is the first primary function of management that precedes all other functions . The planning function involves the decision of what to do and how it is to be done? So managers focus a lot of their attention on planning and the planning process . Let us take a look at the eight important steps of the planning process.
The planning function of management is one of the most crucial ones. It involves setting the goals of the company and then managing the resources to achieve such goals. As you can imagine it is a systematic process involving eight well thought out steps. Let us take a look at the planning process.
1] Recognizing Need for Action
An important part of the planning process is to be aware of the business opportunities in the firm’s external environment as well as within the firm. Once such opportunities get recognized the managers can recognize the actions that need to be taken to realize them. A realistic look must be taken at the prospect of these new opportunities and SWOT analysis should be done.
Say for example the government plans on promoting cottage industries in semi-urban areas. A firm can look to explore this opportunity.
What are the Types of Plan?
2] Setting Objectives
This is the second and perhaps the most important step of the planning process. Here we establish the objectives for the whole organization and also individual departments . Organizational objectives provide a general direction, objectives of departments will be more planned and detailed.
Objectives can be long term and short term as well. They indicate the end result the company wishes to achieve. So objectives will percolate down from the managers and will also guide and push the employees in the correct direction.
Importance, Features, and Limitation of Planning here in detail .
3] Developing Premises
Planning is always done keeping the future in mind, however, the future is always uncertain. So in the function of management certain assumptions will have to be made. These assumptions are the premises. Such assumptions are made in the form of forecasts, existing plans, past policies, etc.
These planning premises are also of two types – internal and external. External assumptions deal with factors such as political environment, social environment , the advancement of technology , competition, government policies , etc. Internal assumptions deal with policies, availability of resources, quality of management , etc.
These assumptions being made should be uniform across the organization. All managers should be aware of these premises and should agree with them.
4] Identifying Alternatives
The fourth step of the planning process is to identify the alternatives available to the managers. There is no one way to achieve the objectives of the firm, there is a multitude of choices. All of these alternative courses should be identified. There must be options available to the manager.
Maybe he chooses an innovative alternative hoping for more efficient results. If he does not want to experiment he will stick to the more routine course of action. The problem with this step is not finding the alternatives but narrowing them down to a reasonable amount of choices so all of them can be thoroughly evaluated.
5] Examining Alternate Course of Action
The next step of the planning process is to evaluate and closely examine each of the alternative plans. Every option will go through an examination where all there pros and cons will be weighed. The alternative plans need to be evaluated in light of the organizational objectives.
For example, if it is a financial plan. Then it that case its risk-return evaluation will be done. Detailed calculation and analysis are done to ensure that the plan is capable of achieving the objectives in the best and most efficient manner possible.
6] Selecting the Alternative
Finally, we reach the decision making stage of the planning process. Now the best and most feasible plan will be chosen to be implemented. The ideal plan is the most profitable one with the least amount of negative consequences and is also adaptable to dynamic situations.
The choice is obviously based on scientific analysis and mathematical equations. But a managers intuition and experience should also play a big part in this decision. Sometimes a few different aspects of different plans are combined to come up with the one ideal plan.
7] Formulating Supporting Plan
Once you have chosen the plan to be implemented, managers will have to come up with one or more supporting plans. These secondary plans help with the implementation of the main plan. For example plans to hire more people, train personnel, expand the office etc are supporting plans for the main plan of launching a new product. So all these secondary plans are in fact part of the main plan.
8] Implementation of the Plan
And finally, we come to the last step of the planning process, implementation of the plan. This is when all the other functions of management come into play and the plan is put into action to achieve the objectives of the organization. The tools required for such implementation involve the types of plans- procedures, policies, budgets, rules, standards etc.
Solved Question for You
Q: _______ involves scientific analysis of the decision process
- Linear Programming
- Risk Analysis
- Operations Research
- None of the above
Ans: The correct option is C. Operation research is the application of scientific and mathematical methods to study and analyse problems involving complex systems. It is a powerful tool for decision making.
- Types of Plan
- Introduction, Meaning, Importance, Features and Limitations of Planning
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For startups, a well-written business planning document is important to source capital from banks and venture capitalists. A business plan also provides a clear direction for business growth. But how else does planning affect businesses? What does a good business plan contain? Let's look at the answers.Simply put, business planning…
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For startups, a well-written business planning document is important to source capital from banks and venture capitalists. A business plan also provides a clear direction for business growth . But how else does planning affect businesses? What does a good business plan contain? Let's look at the answers.
Business planning definition
Simply put, business planning is the process of developing a roadmap aimed at achieving a business goal. It involves key stakeholders coming together to brainstorm ideas and strategies and collating them into a formal, written document known as a business plan.
A business plan is an official document that outlines a business's core activities, objectives, and roadmap to achieving its goals. For example, if you are starting a new bakery, a business plan would include information about your products, marketing strategies, and financial situation. .
A good business plan helps a business focus on its short-term and long-term goals, and outlines the specific steps needed to achieve them. In summary, business planning is a key process that businesses undertake to achieve their goals and success.
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:
- Executive Summary
- Business Description
- Market Analysis
- Products and Services
- Marketing and Sales Strategy
- Management and Organization
- Financial Projections
- Funding Requirements
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.
A SWOT analysis is a strategic planning tool used by business owners to identify a business's strengths, weaknesses, opportunities, and threats in the market. Conducting a SWOT analysis will guide you on what you do well, identify your weak points, maximize your opportunities, and avoid threats.
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.
Blooming Boutique is a retail female clothing brand located in Delaware, US. 1 By following different generations' fashion trends, and monitoring target customers' fashion preferences, the brand intends to produce female fashion wear that is appealing to customers. They also use styles, colours, and different fashion fits to draw attention to the consumer while satisfying their sartorial needs.
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.
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.
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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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:
Business planning - Key takeaways
Business planning is a process of developing a roadmap aimed at achieving a business goal.
A business plan is written documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
The importance of a business plan can be seen in the organized growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
Some crucial elements needed in business planning are executive summary, business description, market analysis, products and services, marketing and sales strategy, management and organization, financial projections, funding requirements.
Business planning process usually involves the following steps: define business goals, conduct market research , identify resources, develop strategies, create a business plan, implement the plan, evaluate and adjust.
- Blooming boutique, bloomingboutique.com, 2022.
- Jared Lindzon, The importance of a business plan, waveapps.com, 2022.
- Susan Ward, What is business planning, thebalancesmb.com, 2020.
- Staff, Business plan basic elements, bizally.com.au, 2022.
- Rich Longo, Why you need a business plan, sbdc.duq.edu, 2019.
- Staff, Effective business plan, lancasters.uk.net, 2022.
Frequently Asked Questions about Business Planning
--> what is a business plan.
A business plan is an official documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
--> How to make a good business plan?
To make a good business plan, it's important to research the market and industry trends, set specific and measurable goals, develop a clear strategy, and create a well-organized and detailed plan that includes financial projections, marketing strategies, and plans for potential challenges. It's also crucial to review and adjust the plan regularly to ensure it remains relevant and effective.
--> How is a business plan structured?
A business plan usually has the following structure:
--> Why is a business plan important?
A business plan is crucial for several reasons. Firstly, it enables companies to secure funding from investors by providing a clear roadmap of the business's goals and strategies. Secondly, it provides a framework for companies to work towards their objectives, monitor progress, and adjust course as needed. Lastly, it helps companies anticipate and address potential challenges that may arise in the course of business operations.
--> What are the three main purposes of a business plan?
The three main purposes of a business plan are:
- To serve as a roadmap for achieving the business's goals,
- To attract funding and investment from investors or financial institutions, and
- To provide a framework for managing and monitoring the business's performance over time.
Final Business Planning Quiz
Business planning quiz - teste dein wissen.
What is business planning?
Business planning is a process of developing a roadmap aimed towards achieving a business goal.
The document used by stakeholders to collate ideas into a formally written document that summarizes the business current state, the state of the business market, and steps to improve the business performance is called ……
A business plan
What is a business plan?
A business plan is an officially written document showing a business core activities, objectives, and the business roadmap to achieving its established objectives.
Give two importance of a good business plan
A. The importance of a good business plan can be seen in the organised growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
B. A business plan also gives investors an idea of how the business is operated and if it is worth investing in. A good business plan attracts investors and sells them the idea of your business.
What is the first element of a business plan?
What information does the executive summary provide?
This executive summary 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 business vision.
A business budget usually includes ….,.
A business budget includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
What does a SWOT analysis show about a business ?
A SWOT analysis shows a business strength, weaknesses, opportunities and threats to the business.
A good business plan helps a business focus on its short term and long term goals, and it also helps business owners focus on the specified steps put in place to help the business succeed. True or False?
A business plan is the same for all types of business.
Financial plans are not a part of business plan.
SWOT analysis is a way to carry out a market analysis.
Market analysis and marketing strategy can be used interchangeably.
A good business plan can help startups attract investment or get loans without a proven financial record.
What is the difference between market analysis and marketing strategy?
Market strategy provides information on how a business plans to distribute its products or services while market analysis gives details on business strengths, weaknesses along with market threats and opportunities.
Business planning is a process of ________ aimed towards achieving a business goal.
developing a roadmap
A business plan is an ________ showing a business core activities, objectives, and the business roadmap to achieving its established objectives
officially written document
A good business plan only helps the business focus on its short term goals.
A good business plan can help a company to:
Stay in line with the business objectives
Executive Summary is the description of the products and services offered by a business.
Good business planning requires a well written market analysis showing demand and supply.
SWOT analysis stands for ________ .
strength, weaknesses, opportunities and threats in the market
________ includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
A business budget
A company generating a revenue of £150,000 from a business with a total cost of £80,000 per year. How much profit does it earn?
£150,000 - £80,000 = £70,000.
Variable cost = Output x Variable cost per unit output
What is not a business variable cost?
production materials expenses
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Planning process: 7 vital steps of planning, meaning of planning.
Planning is ascertaining prior to what to do and how to do. It is one of the primary managerial duties. Before doing something, the manager must form an opinion on how to work on a specific job. Hence, planning is firmly correlated with discovery and creativity. But the manager would first have to set goals. Planning is an essential step what managers at all levels take. It requires making decisions since it includes selecting a choice from alternative ways of performance.
Also Check: What is the Importance of Planning?
As planning is an activity, there are certain reasonable measures for every manager to follow:
(1) Setting Objectives
- This is the primary step in the process of planning which specifies the objective of an organisation, i.e. what an organisation wants to achieve.
- The planning process begins with the setting of objectives.
- Objectives are end results which the management wants to achieve by its operations.
- Objectives are specific and are measurable in terms of units.
- Objectives are set for the organisation as a whole for all departments, and then departments set their own objectives within the framework of organisational objectives.
A mobile phone company sets the objective to sell 2,00,000 units next year, which is double the current sales.
(2) Developing Planning Premises
- Planning is essentially focused on the future, and there are certain events which are expected to affect the policy formation.
- Such events are external in nature and affect the planning adversely if ignored.
- Their understanding and fair assessment are necessary for effective planning.
- Such events are the assumptions on the basis of which plans are drawn and are known as planning premises.
The mobile phone company has set the objective of 2,00,000 units sale on the basis of forecast done on the premises of favourable Government policies towards digitisation of transactions.
(3) Identifying Alternative Courses of Action
- Once objectives are set, assumptions are made.
- Then the next step is to act upon them.
- There may be many ways to act and achieve objectives.
- All the alternative courses of action should be identified.
The mobile company has many alternatives like reducing price, increasing advertising and promotion, after sale service etc.
(4) Evaluating Alternative Course of Action
- In this step, the positive and negative aspects of each alternative need to be evaluated in the light of objectives to be achieved.
- Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the planning premises and within the availability of capital.
The mobile phone company will evaluate all the alternatives and check its pros and cons.
(5) Selecting One Best Alternative
- The best plan, which is the most profitable plan and with minimum negative effects, is adopted and implemented.
- In such cases, the manager’s experience and judgement play an important role in selecting the best alternative.
Mobile phone company selects more T.V advertisements and online marketing with great after sales service.
(6) Implementing the Plan
- This is the step where other managerial functions come into the picture.
- This step is concerned with “DOING WHAT IS REQUIRED”.
- In this step, managers communicate the plan to the employees clearly to help convert the plans into action.
- This step involves allocating the resources, organising for labour and purchase of machinery.
Mobile phone company hires salesmen on a large scale, creates T.V advertisement, starts online marketing activities and sets up service workshops.
(7) Follow Up Action
- Monitoring the plan constantly and taking feedback at regular intervals is called follow-up.
- Monitoring of plans is very important to ensure that the plans are being implemented according to the schedule.
- Regular checks and comparisons of the results with set standards are done to ensure that objectives are achieved.
A proper feedback mechanism was developed by the mobile phone company throughout its branches so that the actual customer response, revenue collection, employee response, etc. could be known.
1 Mark Questions:
Q. “To See Whether Plans Are Being Implemented and Activities Are Being Performed According to Schedule,” is a Step of Planning Process. Identify the Step.
Follow up action.
Q. Which is the Most Crucial Step in the Planning Process?
Q. What is meant by ‘follow Up’ as involved in the Planning Process?
It means to ensure the actual work is taking place as per the planned work.
Frequently Asked Questions on Planning Process
What are the steps involved in the planning process.
The steps involved in the planning process are as follows:
- Developing of objectives
- Developing tasks that are required to meet those objectives
- Determining resources needed to implement those tasks
- Creating a timeline
- Determining tracking and assessment method
- Finalising the plan
- Distributing the plan to everyone involved in the process of planning
What are the classification of plans?
Plans can be classified into three types:
- Operational planning
- Strategic planning
- Tactical planning
What are the features of Planning?
- Planning is a primary function
- Planning is goal-oriented
- Planning is continuous
- Planning is futuristic or future oriented
- Planning focuses on achieving the objectives
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Table of contents, what is business planning.
Business planning is a crucial process that involves creating a roadmap for an organization to achieve its long-term objectives. It is the foundation of every successful business and provides a framework for decision-making, resource allocation, and measuring progress towards goals.
Business planning involves identifying the current state of the organization, determining where it wants to go, and developing a strategy to get there.
It includes analyzing the market, identifying target customers, determining a competitive advantage, setting financial goals, and establishing operational plans.
The business plan serves as a reference point for all stakeholders , including investors, employees, and partners, and helps to ensure that everyone is aligned and working towards the same objectives.
Importance of Business Planning
Business planning plays a critical role in the success of any organization, as it helps to establish a clear direction and purpose for the business. It allows the organization to identify its goals and objectives, develop strategies and tactics to achieve them, and establish a framework of necessary resources and operational procedures to ensure success.
Additionally, a well-crafted business plan can serve as a reference point for decision-making, ensuring that all actions taken by the organization are aligned with its long-term objectives.
It can also facilitate communication and collaboration among team members, ensuring that everyone is working towards a common goal.
Furthermore, a business plan is often required when seeking funding or investment from external sources, as it demonstrates the organization's potential for growth and profitability. Overall, business planning is essential for any organization looking to succeed and thrive in a competitive market.
Business Planning Process
Step 1: defining your business purpose and goals.
Begin by clarifying your business's purpose, mission, and long-term goals. These elements should align with the organization's core values and guide every aspect of the planning process.
Step 2: Conducting Market Research and Analysis
Thorough market research and analysis are crucial to understanding the industry landscape, identifying target customers, and gauging the competition. This information will inform your business strategy and help you find your niche in the market.
Step 3: Creating a Business Model and Strategy
Based on the insights from your market research, develop a business model that outlines how your organization will create, deliver, and capture value. This will inform the overall business strategy, including identifying target markets, value propositions, and competitive advantages.
Step 4: Developing a Marketing Plan
A marketing plan details how your organization will promote its products or services to target customers. This includes defining marketing objectives, tactics, channels, budgets, and performance metrics to measure success.
Step 5: Establishing Operational and Financial Plans
The operational plan outlines the day-to-day activities, resources, and processes required to run your business. The financial plan projects revenue, expenses, and cash flow, providing a basis for assessing the organization's financial health and long-term viability.
Step 6: Reviewing and Revising the Business Plan
Regularly review and update your business plan to ensure it remains relevant and reflects the organization's current situation and goals. This iterative process enables proactive adjustments to strategies and tactics in response to changing market conditions and business realities.
Components of a Business Plan
The executive summary provides a high-level overview of your business plan, touching on the company's mission, objectives, strategies, and key financial projections.
It is critical to make this section concise and engaging, as it is often the first section that potential investors or partners will read.
The company description offers a detailed overview of your organization, including its history, mission, values, and legal structure. It also outlines the company's goals and objectives and explains how the business addresses a market need or problem.
Products or Services
Describe the products or services your company offers, emphasizing their unique features, benefits, and competitive advantages. Detail the development process, lifecycle, and intellectual property rights, if applicable.
The market analysis section delves into the industry, target market, and competition. It should demonstrate a thorough understanding of market trends, growth potential, customer demographics, and competitive landscape.
Marketing and Sales Strategy
Outline your organization's approach to promoting and selling its products or services. This includes marketing channels, sales tactics, pricing strategies, and customer relationship management .
Management and Organization
This section provides an overview of your company's management team, including their backgrounds, roles, and responsibilities. It also outlines the organizational structure and any advisory or support services employed by the company.
The operational plan describes the day-to-day operations of your business, including facilities, equipment, technology, and personnel requirements. It also covers supply chain management, production processes, and quality control measures.
The financial plan is a crucial component of your business plan, providing a comprehensive view of your organization's financial health and projections.
This section should include income statements , balance sheets , cash flow statements , and break-even analysis for at least three to five years. Be sure to provide clear assumptions and justifications for your projections.
Appendices and Supporting Documents
The appendices and supporting documents section contains any additional materials that support or complement the information provided in the main body of the business plan. This may include resumes of key team members, patents , licenses, contracts, or market research data.
Benefits of Business Planning
Helps secure funding and investment.
A well-crafted business plan demonstrates to potential investors and lenders that your organization is well-organized, has a clear vision, and is financially viable. It increases your chances of securing the funding needed for growth and expansion.
Provides a Roadmap for Growth and Success
A business plan serves as a roadmap that guides your organization's growth and development. It helps you set realistic goals, identify opportunities, and anticipate challenges, enabling you to make informed decisions and allocate resources effectively.
Enables Effective Decision-Making
Having a comprehensive business plan enables you and your management team to make well-informed decisions, based on a clear understanding of the organization's goals, strategies, and financial situation.
Facilitates Communication and Collaboration
A business plan serves as a communication tool that fosters collaboration and alignment among team members, ensuring that everyone is working towards the same objectives and understands the organization's strategic direction.
Business planning should not be a one-time activity; instead, it should be an ongoing process that is continually reviewed and updated to reflect changing market conditions, business realities, and organizational goals.
This dynamic approach to planning ensures that your organization remains agile, responsive, and primed for success.
As the business landscape continues to evolve, organizations must embrace new technologies, methodologies, and tools to stay competitive.
The future of business planning will involve leveraging data-driven insights, artificial intelligence, and predictive analytics to create more accurate and adaptive plans that can quickly respond to a rapidly changing environment.
By staying ahead of the curve, businesses can not only survive but thrive in the coming years.
Business Planning FAQs
What is business planning, and why is it important.
Business planning is the process of setting goals, outlining strategies, and creating a roadmap for your company's future. It's important because it helps you identify opportunities and risks, allocate resources effectively, and stay on track to achieve your goals.
What are the key components of a business plan?
A business plan typically includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategies, and financial projections.
How often should I update my business plan?
It is a good idea to review and update your business plan annually, or whenever there's a significant change in your industry or market conditions.
What are the benefits of business planning?
Effective business planning can help you anticipate challenges, identify opportunities for growth, improve decision-making, secure financing, and stay ahead of competitors.
Do I need a business plan if I am not seeking funding?
Yes, even if you're not seeking funding, a business plan can be a valuable tool for setting goals, developing strategies, and keeping your team aligned and focused on achieving your objectives.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .
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The Business Planning Process: 6 Steps To Creating a New Plan
In this article, we will define and explain the basic business planning process to help your business move in the right direction.
What is Business Planning?
Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.
The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.
The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.
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The Better Business Planning Process
The business plan process includes 6 steps as follows:
- Do Your Research
- Calculate Your Financial Forecast
- Draft Your Plan
- Revise & Proofread
- Nail the Business Plan Presentation
We’ve provided more detail for each of these key business plan steps below.
1. Do Your Research
Conduct detailed research into the industry, target market, existing customer base, competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:
- What are your business goals?
- What is the current state of your business?
- What are the current industry trends?
- What is your competition doing?
There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.
You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.
Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.
This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.
3. Calculate Your Financial Forecast
All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.
Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.
A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.
This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.
4. Draft Your Plan
With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.
If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.
5. Revise & Proofread
Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.
Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.
6. Nail the Business Plan Presentation
The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.
Business Planning Process Conclusion
Every entrepreneur dreams of the day their business becomes wildly successful.
But what does that really mean? How do you know whether your idea is worth pursuing?
And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way.
Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.
Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.
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What Is the Business Planning Process?
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The business planning process is designed to answer two questions: Where are we now? Where do we want to go? The result of this process is a business plan that serves as a guide for management to run the company. Describing the most critical tasks that must be completed and the time frame for completion, a business plan allows companies to allocate resources to accomplish goals.
Where Are We Now?
Companies begin the planning process by taking a critical look at the business' current state. The management team evaluates what the company is doing well and where it is falling short. Objectives could be revenue targets or ascertaining the company’s reputation for reliability in the marketplace. The planning process provides a blueprint for improvement in all areas.
What's the Competition Doing?
Keeping track of competitors is an ongoing process in business, but in the planning cycle this information is used to evaluate the strengths and weaknesses of each competitor. This analysis shows management how to position the company’s products or services to compete more effectively. It may be that the best way to contend with a competitor is by offering better customer service rather than lower prices.
What's the Opportunity?
Success in business is the result of providing products and services that meet customers’ needs in a significantly better way than competitors. Before launching a product or entering a new market, management must determine a strong customer need to solve a problem. Solving the customer's problem must be important and urgent. Because no company has unlimited resources, these decisions about which opportunities are best to exploit are critical to the company’s success.
How Will We Attract and Keep Customers?
The marketing plan details which customer groups will be targeted and how these customers will be convinced to make a purchase. The planning process must produce specific and detailed tactics, not vague generalities. Instead of saying the company will employ Internet marketing, the plan must detail which categories of Internet marketing will be emphasized, which websites will be used, and the cost of advertising. Also included in the plan must be reasons why these strategies are likely to result in success.
How Will We Allocate Budget?
The planning process determines how all the assets of the company will be marshaled to achieve the goals and objectives. Thorough planning allows financial resources to be used wisely, and for the human resources of the company to be as productive as possible. Planning helps avoid problems such as cash shortages, inability to deliver products on schedule, or inadequate staff levels.
What's the Financial Forecast?
A financial forecast, sometimes referred to as a company budget, is produced during the planning process. The forecast numbers are compared to actual results during the year. Discrepancies are analyzed to determine if a change of course is required, or if shifting expenses may be necessary due to a changing economic environment.
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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."
What is the meaning of corporate planning, the impact of planning on business growth, business enterprise planning, strategic marketing plan strategy evaluation, the definitions of total asset turnover and profit margin, why are major risks in the business plan, principles of marketing management, definition of a successful strategic business plan, why create a business plan, most popular.
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The 4 Main Steps in the Business Planning Process
4 steps to the business planning process.
Business planning is defined as the process of identifying an organization's strategies, objectives, and projected actions in order to optimize development and success over a specific time frame. Proper business planning is absolutely crucial to an organization's success and overall bottom line profitability. In order for a business planning process to optimally benefit an organization, it must be both realistic and achievable. For this reason, some experts actually define the business planning process as a management function that involves the steps, design, and quantified resources necessary in order to achieve the optimized balance between demands and needs utilizing available resources. One study shows that the average entrepreneur business owner dedicates around 68% of time spent working in their business on daily tasks and addressing short term issues. The same study shows that only around 32% of the time a business owner spends at work is dedicated to strategic planning and long term goals. Clearly, there is a pressing need for both small business owners and business management professionals at larger corporations to focus on the business planning process. Before starting business planning processes, professionals must make sure they properly understand them. Most human resource and business management professionals agree that there are 4 basic steps within the business planning process. The 4 main steps in the business planning process include-
The first of the planning process steps is the identification of objectives and business goals to be accomplished. Business goals may be either short term or long term in nature. In fact, many organizations list many different short term and long term goals during this step. Identifying business goals and objectives to accomplish is necessary in order to actually achieve goals at an organization. Additionally, well established business goals help business management team professionals and human resource staff members to better perform their roles. Alternatively, without the establishment of well defined business objectives, anything from marketing strategy to customer service oriented goals would not be achievable. The best business goals and objectives will follow the SMART goal acronym which stands for specific, measurable, achievable, realistic, and timely. These SMART business goals and objectives will help business owners and their employees create and maintain a competitive advantage in the industry. Securing a competitive advantage will likely result in a larger market share and cash flow increases.
After short term and long term business goals are established, the next process steps can be undertaken. The second of the planning process steps is the formulation of strategies in order to achieve set business goals and objectives. Creating action steps and developing techniques for specific business goals will help business professionals to achieve previously set objectives. Best practices for this step of the planning process include the involvement of team members. Team members can contribute invaluable advice and insights as a result of their first hand experience and knowledge. Additionally, team members can help business leaders better understand if any portions of business goals are unrealistic or unachievable.
Once the business strategy and business goals are understood, the management team and other involved parties can move on to the next step. The third of the planning process steps is the designation of employees to roles and tasks. It is crucial that individual team members understand their responsibilities comprehensively. For this reason, best practices suggest that business management professionals make sure to ask team members if they have any questions regarding their role in the business planning process. One important consideration during this process step is for the management team to make sure they are establishing realistic time frames for tasks delegated. Providing too much time or too little time can result in devastating business planning consequences. If supplied with too much time to accomplish delegated responsibilities, employees may procrastinate. On the other hand, if supplied with not enough time, employees may become demoralized about the possibility to achieve goals and give up.
The last of the planning process steps is the implementation, direction, and monitoring of business planning action items. The management team should not be content with team members merely understanding their role but must also actively monitor employee task progression. Best practices recommend consistent follow ups between management team professionals and employees in regards to their progress. Consistent follow ups can not only increase employee morale but also helps to identify issues early on. For example, if an employee needs additional resources to complete their tasks, the management team and human resource department can immediately address that issue. Alternatively, the human resource department and business management professionals may have not learned of the issue until even more significant issues developed.
- Business planning consists of 4 main steps- identification, formulation, designation, and execution.
- Tools helpful for the business planning process include SMART goals and SWOT analysis techniques.
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If you are planning to start or grow your business, you might have heard about the importance of the business planning process countless times. And yes, it is necessary to have a plan. After all, it’ll be your roadmap to success.
But how would you go about it? Where will you start? And most importantly is there a tried and tested process that can make your job easier? What if we told you there is such a process?
And through this article, we’ll walk you through everything from what is business planning to the steps of the business planning process .
What is Business Planning?
Business planning is the process of giving structure to your business idea. It acts as a roadmap to your business journey, helps you get through obstacles, and maximizes opportunities.
It also helps you set realistic goals and pursue the same with a structured action plan.
Moreover, through a business plan, you can analyze your company’s strengths and weaknesses, and understand how that would impact your company while dealing with market competition and how your strengths would help you achieve your goal.
Above all, doing business with a well-written business plan increases your chances of success.
Steps of the Business Planning Process
Although there’s no sole right way to go about the process of planning your business, here’s a compilation of steps that’ll make your planning process faster and easier.
1. Carry out your research
The first step to creating a business plan is to do thorough research about the business and industry you are trying to get into. Tap into all the information you can get about your target audience, potential customer base, competitors, market and industry trends, cost of business, etc.
You can give a form to your research by asking yourself the following questions:
- What are your goals?
- Where does your business stand currently?
- What are the prevailing market trends?
- What strategies is your competitor following?
You can find your answers by conducting market surveys , talking to customers and industry experts, designing good questionnaires, reading articles, blogs, and news updates about your industry and related ones, and so on.
Also, it is a good practice to conduct a SWOT analysis for your company to understand how your company’s strengths and weaknesses would help you stand apart from your competitors based on the current market statistics.
2. Make a Framework
Once you’re done with your research the next step is to make a framework or a set of strategies for your business based on your research and business goals. You can either design strategies from scratch or reframe previously tried and tested successful strategies to fit your business goals.
But remember that you’ll have to tweak strategies to fit your unique competitive advantages and goals. Hence, strategies that are already being used can act as a good foundation, but it is essential to remember that you’ll have to expand upon them or improvise them for your business.
This step can be completed by taking a deep dive into your customer’s buying motivations and challenges that your product can help solve. Based on that, make a marketing plan, operations plan, and cost structure for your business at least for the first few years of your business.
3. Formulate your Financial Forecasts
No matter how tedious finances might seem, they are an integral part of any business. When you map out your finances it is essential to note down all the costs you’ll incur as you grow and run your business for the next five years and what would be your potential revenue , and if or not it would leave room for profit.
You can get your financial forecast by adding your financial assumptions to a financial system which will give you your cash flow statements and give you an idea of what amount of funds you’ll need to start and run your business for the first year.
This step is especially helpful if you want to acquire funding for your business. Nonetheless, it helps you prepare to deal with the financial aspects of your business.
A financial statement essentially provides details of a company’s expenses and profits. It also provides an overview of the company’s current financial stance, including its assets and liabilities.
Through this section try to write down and explain how you plan to use your investments and how would the same give a return.
4. Draft a Plan
As you’re done with creating business strategies and planning your finances, it is time to draft your business plan and compile everything into a single document. As you are done with all the technical aspects, this step should feel relatively easy.
But if you need help drafting a business plan and making it look presentable, you can subscribe to business plan software that comes with predesigned templates and tools to make your work easier .
5. Recheck and Improvise
Now as you’re done with writing your plan, it is a good idea to give it enough time to edit it. Check for any unclear sentences, irrelevant phrases, or confusing terms.
Take suggestions from your team members who are familiar with the functioning of your business. Finally, proofread for any grammar or punctuation errors. One of the most popular and useful pieces of editing advice is to put your work aside for a while and then look at it with fresh eyes to edit it better.
6. Create an Impressive Business Plan Presentation
Now, as you’re done with writing your business plan it is time to create a presentation that leaves an excellent impression on your audience. Highlight all the important and relevant points.
Also, add references for your investors like your financial reports, resumes of your key team members, snippets of your marketing plan, and past sales reports to have a well-rounded presentation.
It is true that starting a business is intimidating. It includes a bunch of emotions, chaotic ideas, and a will to take risks. ( Risks are a part and parcel of starting a business, no matter how much you plan, but yes planning helps you prepare for it.) But in the end, all of us know that all of it is worth it if you have a profitable business in the end.
And business planning is something that takes you one step closer to your idea of success. Moreover, a plan keeps you going in the face of challenges and adversities, and helps you push yourself a little harder to achieve your dreams when things get tougher.
Above all, a business plan helps you take action and turn ideas into a real and functioning business. So, what are you waiting for? Go ahead and start planning !
And while you’re at it do check out Upmetrics’s business planning software to make business planning easier and faster.
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About the Author
Radhika is an economics graduate and likes to read about every subject and idea she comes across. Apart from that she can discuss her favorite books to lengths( to the point you\'ll start feeling a little annoyed) and spends most of her free time on Google word coach.
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