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Business Planning

A business plan is one of the most important tools a business can have. A good business plan helps to give form and substance to an entrepreneurial vision, providing a mechanism that enables business owners, managers and workers to function effectively.

A good business plan will increase your chances of business success. It will help you identify your customers, market area, pricing strategies, financial and operational goals. By completing a business plan you will better understand your competitive advantages, new opportunities, current weaknesses and longer-term objectives for the business. Having a business plan is also an important requirement for gaining finance from financial institutions.

A business plan can serve many purposes and should be of greatest use to us when you are:

· Starting your business

· Expanding your business

· Developing new products

· Obtaining finance

· Making management decisions

· Maintaining control

The business plan is a guide to your business, which allows the reader to understand the culture, vision, goals and objectives of the new venture.

How is a business plan different from a feasibility study?

The feasibility study gives you a preliminary check on the viability of your venture by estimating whether there is sufficient demand for your product/service. The business plan provides a more comprehensive analysis that includes, in addition to market research, a discussion of the operational and financial management and controls of the new business.

Some benefits of producing a business plan include:

· The process of preparing a business plan will force you to think about your business, research some options, recognize opportunities and risks, and test some of your assumptions

· Will help you identify the cash needs of your business

· Can be used to raise funding from banks and from investors

· Can be used to tell employees, investors and others about your plans and strategies

· Provides a benchmark against which to compare the progress and performance of your business.

The business plan represents a unique opportunity for you to think through all aspects of organising and operating a business; provides a facility for examining the consequences of different strategies and for determining what resources are needed to launch or expand your business. Prior to start up, the business plan helps owners/managers fully understand the nature of the venture being undertaken, and assists them in deciding if the business will be viable, or if new direction should be taken.

Business plans are used for many purposes. Essentially, it may be considered that they are:

· A formal expression of the planning process

· A request for funding

· A framework for approval

· A tool for operational business management

Ideally, your business plan will meet all four of the following key objectives:

Formal documentation

Documenting your business plan will make it easier to follow. If undocumented, it is easy to change it on the spur of the moment. Therefore, you are straying from the path that will lead to your destination. Once formalised, your plan provides a guide for operating and reacting to real life events. If as many people as possible can be involved in business planning, the management team is more likely to end up sharing a common sense of purpose and vision. However, it is important not to turn business planning into a bureaucratic exercise.

Funding

The plan may be used to help raise venture capital for new businesses, additional funding for existing businesses, loan capital or in some cases, trade credit. Alternatively, a plan might be used to justify allocating resources internally.

Approvals

A documented plan provides a framework for approval. A small business owner who spends time documenting a plan is most likely to be the one who approves it. A board of directors or management committee approves a plan as a statement of intent. The approvals and funding processes are closely aligned. In a business sense, the approval of a plan is usually the same thing as approval of funding.

Operational management

A business plan provides a framework for managing a business – from an overall strategy to day-to-day activities. As a tool, the plan provides limits and goals against which to measure actual performance.

The central objective for driving a profit making business is often thought to be maximising profits. However, maximising profits short-term could well kill the businesses long-term prospects. This can be prevented by investing profits into upgrading and replacing machinery, equipment, human capital etc. This requires effective planning. Strategic planning ensures that businesses do not get carried away with the excitement of large profits, and spend them wisely to aid the future success of the company.

Business planning is about a journey. With a good business plan, you know where you started, where you are going, and how to get there. The plan is your starting point. It maps a route to your destination i.e. success. Remember that businesses do not plan to fail, they simply fail to plan.

Article by Staff of ACS Distance Education

For more information on courses or publications from the school, contact:

ACS in Australia www.acs.edu.au/Courses/Business-and-Management-courses.aspx

ACS in the U.K. www.acsedu.co.uk/Courses/Business-and-Management-Courses.aspx

ACS Bookshop www.acsbookshop.com


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