The Helm Of An Organization

Published Date: 02 Nov 2017

Chalking a business plan is never an easy process. If you are looking to write the plan down in a single attempt, good luck to you. Remember, it is a continuous process that never comes to an end. So long you are continuing with your business, you need to make run-time changes to your plan in order to keep your business afloat and relevant. A business plan is nothing but a set of living documents which changes from time to time as and when the situation of the market changes. The rate of change may be weekly as well as monthly depending upon the nature of business and its volatility and the scenario prevailing in the market. However, these are surely not drastic changes but certain modifications and alterations here and there as and when needed by the business.

All said and done, the concept of business planning is entirely based on a varied range of efforts that are in turn, entirely based on uncertainty, complexity, and a potential threat perception from the competitors. As against the popular notion that says a "business plan" are "startups" or "run-ups" to the business, they are basically created by the companies to highlight and project future plans, new products as well as blueprints for acquiring & integrating various other parallel lines of business ventures. Perhaps that is why Dwight D. Eisenhower once commented, "Plans are nothing. Planning is everything."

A true and practical business plan will to a great extent help the business powerhouses to consider various aspects of business and compel them to understand and assimilate the efficacy of a certain line of business against a certain social and financial backdrop. Hence it is about emphasizing on whether to put a business plan into force, rather than how effective you chalk out a business plan for optimization of business. In this context, probably a comment made by Peter Drucker can be mentioned at this juncture. "Entrepreneurship is risky mainly because so few of the so-called entrepreneurs know what they are doing. They lack the methodology. They violate elementary and well-known rules."

If we consider a business as a puzzle then entrepreneurs, according to Drucker, should always require a methodical approach when it comes to putting all its pieces together. In that, an effective business plan only helps them in working smarter. This can be done while staying alert to overcome the challenges and conceptualize newer ideas that may bring freshness in their business approach. Besides, a proper business planning is also badly needed by the entrepreneurs to upkeep the motivation, to meet the expectations of the business, and reducing the stress on themselves, stakeholders as well as the investors.

A business venture often comprises of a number of aspects that are not only complicated but risky as well. Hence, what is the needed is a methodical and meticulously planned approach during the entire course of action. Take for instance amalgamation of two companies or absorption of one company by another. For example, if Company X decides to absorb Company Y, this will invariably demand chalking out a fresh strategy that will support the new order of events where both the two companies will survive under a common roof of management. A successful business plan therefore, becomes absolutely imperative in this scenario.

Likewise, a wide variety of state of affairs may unfold during the course of a business venture, each demanding a unique response from the business owner. A meticulously planned strategy is therefore needed to be chalked out beforehand, so as to encounter each of those scenarios and to ensure that the business powerhouse is not caught off guard. To put it simply, it is these strategies that are technically regarded as business plans that facilitate smooth running of business, irrespective of the conditions prevailing in the market or chain of eventualities unfolding on the business horizon.

Alternatively, a business plan can also be defined as a logical flow of events that are derived at after a thorough investigation and a careful evaluation of all the known as well as unknown market factors, which project the potential outcomes of a business. Some regard business plan as an open-ended procedure that is open to various types of forms – some simplistic while others complicated and detailed.

No matter how you define a business plan, if you are starting off with a business you need to go to the drawing board to etch out a practical strategy (that in other words, may be termed as business plan). Hence the bottom line is that prior to starting a business of your own, you must have a proper business planning to stand any chance of surviving, leave alone excelling. At least you need to have an academic exercise that will guide you in learning all those to run and foster your business.

But for a proper business plan you will simply have no idea where your venture is heading to and you will not be able to evaluate your success or gauge if at all you are succeeding or not. Hence, jotting down a proper business plan is something that you need to have more than anything else to start your own entrepreneurship. In fact, it is here, where the significance of a successful business plan lies, though it does not end here. Rather it is more far-reaching. Let us discuss the significance of a successful business plan in the next chapter.

SIGNIFICANCE OF A SUCCESSFUL BUSINESS PLAN

That business plans enjoy a significant stature in the corporate governance is perhaps an understatement. Such is the significance of a successful business plan that whatever success a business achieves is directly attributed to the planning rather than the performance of those responsible for the achievement. One of the main reasons behind the sudden increase in the importance of a proper business plan is probably a faster development of technology and innovation of newer techniques which has got a shot in its arm over the last few years. Again, this is the result of the new economic order wherein a liberalized economy and globalization has invited a much easier access to newer technology.

Remarkable development in the world of information technology coupled with masterly planning of enterprise resources, innovation of BPR or Business Process Re-engineering, emergence of e-commerce and e-governance, clean desk policies in paperless offices, conceptualization of internet marketing – all have contributed equally as well as significantly in the development of business operation. And when that thrives how business planning can be left behind?

In fact, the policies of LPG (liberalization, privatization, globalization) announced by all the major and not-so-major economies of the world has ushered in a cut throat competition in the market wherein only the fittest would survive. Hence, in order to survive this stiff competition every company requires an able strategic planning backed by a systematic expenditure for the new and improved technology and business strategy. Improvement in technology has, in turn, resulted in a marked acceleration of the rate of growth in business as well as economy. The orientation of the long term business goals and plans from the angle of the corporate world is quite evident from the reformed and fresh views taken by the business houses.

Whereas they were putting more emphasis on short-term profits previously, at present they are concentrating more in the development of long term relationship that can yield long term profits. And when we say long term results, this can only be achieved by a strategic planning. All these, as an obvious result have increased the significance of a proper business planning in today’s business environment.

Let us get into further details to find out the reason behind the significance of a proper business planning. Getting into a business venture, especially in the new world order is like trekking in an alien countryside without a guide map. Just as a guide map guides you before taking every step, a business plan precisely guides you in your business venture by defining and shaping up your business. Besides, it also helps you to identify your goals – both short-term as well as long term and serves the profile of your firm. A successful business plan assists you in allocating your resources in a proper way. It also helps you to tackle various kinds of unanticipated scenarios and complications besides helping you to take decisions that prove fruitful in the long run.

The significance of a proper business plan also makes a world of difference when it comes to applying for business loans and repayment of debts. As a proper business plan is a true reflection of a sound management story and an organized business house, it helps in a long way in acquiring loans from the banks and other financial institutions. Often the plans include a clear indication about the ways of loan repayments. This understandably is one of the most crucial aspects when it comes to acquiring loans. Therefore, the contribution of a proper business plan in acquiring loans is unquestionable. Presence of business plans helps immensely while making any application for a loan. Besides, it also provides a clear idea of the financial position and the objectives of the business to the marketing and the sales personnel as well as to the suppliers of raw materials (if any).

However, in spite of the efficacy of a proper business plan in today’s business, experts are of the opinion that a number of entrepreneurs still have a tendency of dragging their heels in the question of preparing a full-fledged business plan. They often raise the issue of the too drastically changing market dynamics, which to their opinion renders the old plan useless. However, this is only a myth that needs to be busted. The reality is that a business plan, when chalked should take into consideration all the possibilities of changes so that no matter how or to what extent the market changes, the plan never loses its relevance. In fact, a successfully chalked out business plan is actually a road map that a business house needs to follow so as to achieve its objective and reach its goal – both short as well as long term.

If you are of the notion that it is only a corporate business house that would require a business plan, you are again mistaken. Against this popular belief, even a small business house or one which has just started require a business plan more significantly than their more fancied and seasoned competitors. Statistics have revealed that the owners of smaller businesses have an uncanny propensity to ignore the significance of business plan mainly because preparing one is a time consuming affair. It is more evident amongst the entrepreneurs who start the business alone. This only invites disaster in the long run and strikes these people off their orbit. Remember, the benefits of a good business plan truly and ably nullify and outweigh the temporary loss that might have been incurred in the way of preparing a business plan.

Another significance of a business plan lies in its ability to provide a point of reference that helps the runner of business to get back to, in order to evaluate the efficacy of the plan against the reality and check if there is any ambiguity in the planning or in the process the business is being run.

A proper planning also helps in thinking in a more analytical way well in advance and the likely role and effect of a business in the prevailing market scenario. It helps in maintaining a better correlation between the different aspects and parameters of a business. While it is not possible to overstate the value or significance of a business plan, putting across different concepts and ideas in writing is simply priceless and going through a thorough research about the competitors and compiling various important data about them invariably proves to be extremely useful in the long run. It surely adds to the advantage over the competitors.

In a nutshell, business planning is needed by a company in order to:

Control the potential risks of the future

Making preparation and taking guard against the future threat perceptions and uncertainties

Have a complete control over the management and the business environment

Control the growth of business

Avert any crises in sales

Avert any emergency in terms of liquidity of the company

Guarantee development of human resource and manpower

It has been evident from research that companies which have not followed any proper planning have faced the following consequences which in no way helped their business prospects:

A sorry state of affairs in terms of management

Lack of an overall vision that led to some unforeseen unpleasant situations and predicaments

Lack of a proper market planning that had a drastic effect on the sales figures

Some serious issues regarding flow of liquid cash that affected the revenue generated in the long run

A lower than expected investment return

Inability to properly judge the competition and gauge the competitors

Lack of an effective technique to gauge the measure and quality of performance

Lack of financial planning that again had a negative effect on the return in terms of revenues

Failure to achieve the business goals

Let us look into some of the startling results yielded by the recently concluded market researches:

A research that was conducted by Paul Tiffany on behalf of Business Plans for Dummies has revealed that companies which have opted for just the strategic section of the business plan have shown more than 50% improvement in terms of profit & revenue than their counterparts which had opted not to follow any strategic plan.

Another survey had clearly stated that companies which have prepared full-fledged business plans have shown more than 63% growth in terms of revenue earning and 100% growth in terms of profit.

Hence it can well be said that a proper business plan helps in the evaluation of the efficacy of a brand new business venture in an objective, unemotional, rational and a critical manner. It deals with following parameters to get the credible information on the following issues:

Marketing – Pointing out the potential market and the likely volume of sale in the market

Management – Discussing and evaluating the skill and experience of the management team that is set to steer the business

Financial – Discussing the possibility of profit in the business

Therefore, it can well be said that the significance of a business plan is to provide an operating platform that goes a long way in assisting the management team to effectively run a business. Besides, it also increases the probability of earning profit and revenue.

Some of the other significances of an effective business plan are discussed below:

It helps in identification of opportunities and helps in avoiding mistakes

Facilitates development of production, helps in the administration and accentuates development of marketing plans

Helps in budget formation and facilitates short term as well as long term financial projections

It helps in better communication between various areas of a business and serves as ‘product or service selling tool’

It forms the foundation for creating a financial proposal that is chiefly aimed at the investors and stakeholders

It helps in determining the amount as well as the nature of financing that is required

An effective business plan also forecasts the likely profitability and the Return on Investment (RoI)

It can forecast the flow of cash, illustrate liquidity besides helping in debt repayment

A very pertinent question that can be raised at this juncture is who are the ones who will use a business plan? It is to be used by everyone in business – right from the grass root level to the top brass of the company or is it aimed to be used by selective personnel associated with a business?

Ideally, a business plan is created to be used by the management and the ones who have the responsibility of designing the operation and the hierarchical structure of the business. Business plans may vary in types and approach depending upon the objective. In case the plan is used to forecast the financial statements of a company then it will have a certain structure. Again, if it is not used to raise funds and revenue and is mainly structured for internal use, it will vary in form and approach. The primary objective of the plan then will be internal fabrication of the business and will naturally be less formal.

Again, if the plan is created to be presented to the outside world, specifically to the investors and other stakeholders as an economic proposal, the approach and the quality of presentation will vastly differ. In that case, a thorough and impeccable financial analysis becomes very important.

It is easy to start a business just as it is easy to start a journey. But tasting success in business without a business plan is just as difficult as sticking to the right path without a road map. But for a road map, you might eventually manage to reach your destination but there is every possibility of losing your way a number of times. The same speaks for a proper business plan.

TYPES OF BUSINESS PLAN

Now, when we speak of business plans, there are several types, each having their own area of utilities and effectiveness. Each of these types is applicable in various stages of running a business. Let us get into the details of each of these types of business plans one by one.

Start Up Business Plan:

This type of business plan is the most popular in the business fraternity and is generally termed as a conventional business plan. The objective of this type of business plan is introduction of the concepts of a business to its potential lenders & the investors. Besides, it also provides them clear information about the mission and vision of the business, the ethics and the objectives of the business. This variety of business plan follows a more or less traditional path which starts with an executive summary that tells in short, everything about the business and its objectives, and about the men who are directly or indirectly associated with the business.

The summary also deals with the product and service, analysis of the work flow and a more or less detailed illustration of the profit & loss projection. All said and done, a start up business plan should have the following criteria to fulfill its objectives.

It should be simple & practical

Under the changed circumstances, plans written in printed papers in the form of a document have lost its efficacy. Start up Business plans should be made live online on an application that is available online. It can also be in the cloud of a LAN. This is to ensure that whoever interested can have access to the plan and follow it as per their business needs. And the most important thing is that the plan will be available absolutely ready-made. All that is required is a little bit of customization to meet the individual business needs.

One nice aspect about this type of plan is that there is no need of any extra decor to make it look more than needed gorgeous. Moreover, it is a plan in the purest form – not one of those sales brochures that you find aplenty on the internet these days. In case anyone needs the stuff subsequently, the plan can be adopted with some modifications, value-addition as per one’s business needs. These plans include various business parameters like strategies and steps, deadlines, procedures to meet the deadlines and certain fundamental projections pertinent to any business.

1) Organic Growth

You cannot afford to develop a business plan prior to taking any realistic action. That will be a highly impractical thing which can invite disaster. Probably that is the reason why one should not postpone anything for the sake of planning it. There has to be a simultaneous process which involves planning as well as development of the business at the same breath.

Against the popular belief that strategizing should be the first step in a business, as per the modern concept an effective planning should take place around the sets of business activities. This is more evident when planning strategies around sales forecast. As you go for sales and marketing, you should strategize all the modules of business through an effective planning and there has to be a cohesive process in which planning and action go hand in hand.

Help in three activities simultaneously – thinking, planning and testing

One good thing about this type of plan is that it helps the business to change strategies rather quickly and adapt to the changing conditions to ensure that the business stays on top. It also helps in managing the assumptions as and when the ground realities change and also facilitate new sets of thoughts that will match the new order of things. Scenarios change very quickly in business and it is all about adopting to the changes. Hence, the success of businesses depends upon how quickly and smoothly the approach of the business is changed and modified to adopt the new things. This type of plan also helps immensely to try out the new plans against the new conditions and a new set of things quickly so as to optimize the effect of the plan.

Feasibility Business Plan

This type of business plan is more or less similar to a pre-start up plan, in which the entrepreneurs can get a holistic picture that provides an idea about whether a particular type of business is worth to be followed or is the time ripe for pursuing a particular type of business. This type of business plan generally includes fundamental analysis of the market vis-à-vis the economic scenario prevailing, a rough estimate of the startup cost, price indexes and the expenses involved. At times, this variety of business plans also include mission statements. If the contents included in the plan give an indication of the success of the business, then the subsequent step would be to design a more detailed startup business plan that would follow the more intricate nitty-gritty of the business. A Feasibility Business Plan generally deals with the following two basic questions pertinent to any type of business –

Will the product or service find any customer?

Will the product or service yield any profit?

These two fundamental questions again give rise to a series of factors that a Feasibility Business Plan deals with:

Opportunity/need of the business in the present scenario

A detailed description of product or service

Target customers/market

Benefits provided by the product or service

Critical analysis of the competition likely to be faced by the product or service

Sustainable Competitive edge or advantage enjoyed by the product or service

The risk factors

The investment and breakeven needed by the business and the likely profitability

Recommendations and finally

Conclusion

Internal Business Plans for Internal Use Only

This variety of business plans are exclusively designed for meeting in-house or internal informational purposes, instead of the lenders, investors or other external bodies that are related to the business. These plans also include a detailed description regarding the product and service or a project that is about to be launched. At times these business plans also include various financial projections and other related information that are considered necessary for running the business. However, as said earlier whatever information are shared they are strictly restricted within the employees who are directly involved with the production. The advantages of using these business plans are:

It helps to define the short term and long term objectives of the business in a clear way so that those involved in the production have a clear notion about the mission and vision of the business. It helps to boost their morale and gives a production a shot in the arm, besides increasing the employee satisfaction quotient.

It helps in a better understanding of the contribution made by different areas of the venture in meeting the business objectives

It helps in developing an effective functional blueprint that is needed to be implemented to guarantee the success of the business and meeting its objectives

Strategic Business Plan

This particular type of internal business plan involves strategies that primarily emphasizes on certain segments or areas of business like production, marketing, logistics, sales promotion and so on. Alternately, it can said that the strategic business plans are blueprints that relates the mission, vision and the objectives of a business with the requirement of the product and service generated by the business in the market. Though a strategic business is more or less identical to a conventional internal business plan, a strategic business plan is a more advanced concept of planning which takes a step ahead in defining the objectives of a business and the means to utilize those objectives, besides clinically strategizing various segments of business. One of the ways of putting down a strategic business plan is evaluating the strength & weaknesses of the business in its effort to meet the market demands and its own objectives.

This type of plan is needed to optimize the market research and also helps in attaining maximum share of the market. It also allows the business in focusing on a definite niche or genre which will make a difference from the prospect of sales at the end of the day, earning sizeable revenue for the business growth.

The plan facilitates a better understanding the end customers and their need/demand in a particular market segment. This naturally, helps a company to provide improved product and service to its customers.

Business Growth Plan

The name of this variety of business plans is well self explanatory. A Business Growth Plan is actually an extension of the original plan chalked out by a business house that mainly deals with expansion of various facilities and acquisition of supplementary economic resources so as to meet the increased customer requirements and quickly adapting to the changing market scenarios. Certain business houses create fundamental growth plans during the initial stages of production. Then as and when newer opportunities of growth emerge along with the emergence of newer economic situations, business runners create further detailed plans after accepting the newer growth and expansion prospects.

Drawing up of these business growth plans follows a specific market research technique by which various growth prospects are evaluated. It involves the evaluation of the supply of products to the market, the extent a competition and a detailed discussion about the companies which pose as direct competitors, critical analysis of market demography and related issues. It also helps in the evaluation of the profit against new growth opportunities emerging in the market. This may also include an estimation of the interest amount that the business can earn through saving or investing capital in various financial institutions and banks. Following are the reasons which make drawing a Business Growth Plan so important.

Checking the steps that are taken to fulfill the objectives: A number of business starts with a lot of promise only to lose the way later on. That is where it is extremely important to take hard long look at the steps that are being taken in the course of the business and in this a Business Growth Plan helps immensely.

Refreshing the research on the market: Market scenario is an ever changing phenomenon. So there is an ardent need to have a thorough understanding of the market dynamics and chalk out the growth plan accordingly. A proper Business Growth Plan helps in doing so at regular intervals and freshens up the methodology of the business as and when needed.

Rejuvenate the sense of purpose amongst the men of business: Creating a positive mindset for a venture is quite difficult but maintaining it throughout is even harder. The Business Growth Plan helps immensely in maintaining a positive frame of mind amongst those involved in the business and provide them the necessary impetus to surge forward unhindered by the rough weather that often rock the market. It helps people not just to dream big but to transform the dream into a reality.

Fine-tuning the message: Every business has a Service to be delivered to the customers and a business growth plan helps that Service to be fine tuned to cater to the changing needs of the customers and the economic scenarios.

Taking stock of recourses: This is another area which is immensely helped by a Business Growth Plan. Understandably, the first and foremost thing that is needed for growth is an analytical evaluation of the recourses and taking the stock thereof.

THINGS TO REMEMBER WHILE CHALKING OUT A BUSINESS PLAN

Chalking out a business plan is easier said than done. Before you start, you need to take a number of issues into consideration. You need to have answers to certain specific questions which are extremely pertinent to whatever type of plan is being created. You need to have specific answer to certain questions like what type of product/service is to be provided through the business or what sector of market is to be targeted? What types of demands are to be fulfilled by the products or what the basic means to reach the target customers? How a steady supply of financial resources – both financial and otherwise, is to be maintained to start or continue the business in question? These are some of fundamental yet most pertinent questions, the answers to which should be available prior to chalking out a business plan.

When it comes to developing an effective business plan, there is no such formula which can be applied. This is a cohesive process that involves certain critical elements of the business. Let us take stock of the finer points that are needed to be remembered while preparing a business plan.

Broadly speaking, a typical business plan will contain three broad parts. Part 1 will essentially consist of a written document that describes various management and marketing parameters and aspects related to the business. The second part will include the financial projections of the company. Then comes section three that will involve all the supplemental information. A typical business plan should ideally start with a short Executive Summary that of about three to five pages. However, this is done only in case of relatively more complicated and large scale business plans.

Whatever be the scale of the plan, it should be written in a very clear and simple way in thorough, concise and a to-the-point manner. Use of proper headlines, graphical representations, and bullets not only enhance the readability of the plan, but also make it look more presentable. Though the length of the business plan depends upon the complexity and the scale of business, ideally part one of the plan should be 10-20 pages long.

The second part will consist of all the facts and figures in regards to the business outcome along with evaluation of plans and strategies. Remember, all he projections that need to be included in this section should absolutely be based on facts and an elaborate research – not on certain wild guesses. The creator of the business plans should be in a position to justify the facts and figures mentioned in the plan.

The third part of a plan will essentially contain all the supporting information that is needed in reinforcing the first two parts. Again, the length of the second and third part would entirely depend on the nature and the scale of business in question.

Now, let us discuss the various parts of a typical business plan in details. A standard business plan should always consist of the following 9 sections:

 A Cover Page

 Table of Contents

 An Executive Summary

 Description of the Industry

 Description of the Business

 Opportunities

 Production Plan

 Marketing Plan

 Financial Plan

Cover Page

The cover page should introduce the company to the customers. It also describes the mission and vision of the company and the nature of business that the house is intended to do. It may also have something that says how the company will meet the demand of its end customers. The cover page is the immediate window of the industry. It demonstrates to the world the characteristic of the company establishments.

Table of Contents

This section should generally contain a detailed account of the business and the marketing strategy in a nutshell that will depict a clear idea about the state of affairs of the business. It also should contain information that the end customers as well as others connected indirectly with the business should find helpful for a better understanding of the company and the business.

An Executive Summary

This should ideally be the first part or section of the business & marketing plan that deals in short about the messages that the business house likes to convey to its customers. The summary should have clear cut information about the key messages conveyed by the company in a refined and a polished manner to pique readers’ interest and set the mood for the entire plan.

Industry Description

The name of this section is self explanatory. This section should contain a detailed and in-depth analysis of the related industry with the present state of affairs and the economic scenario prevailing in the market. Going through this, one will understand the backdrop against which the business is being launched and the efficacy of the business.

Business Description

This part of the business plan should exclusively and thoroughly describe the business and have a clear explanation of why the stakeholders such as the investors should come forward and get involved in the venture. It should also discuss the growth possibilities of the business and the likely impact the product and service would have against the present situation of the market. Various issues, particularly those which can give rise to confusion should be discussed clearly and in details so as to remove any confusion whatsoever. This will not only provide a clear idea about the efficacy of the business but also inspire the investors in getting involved.

Opportunities

This section of the business & marketing plan exclusively promotes the concept of the business detailing the long term vision of the business the prospective ways that would bring success to the venture.

Production Plan

Irrespective of the industry and the niche of business, it is highly recommended that a clear idea is expressed about the ways of managing various operations of the business in a cost-effective way. As the ultimate objective of every business is offering a quality product or a service to the target customers, there is an ardent need of a careful and meticulous planning to ensure quality delivery within a stipulated time frame and budget. All these need to be discussed in details in this section.

Marketing Plan

This is another very crucial component that a business plan should consist of. It is that section which deals with the product and the service in details, putting maximum emphasis on the critical features and their effectiveness.

Financial Plan

Understandably, this part of the business plan deals with various financial issues that would provide accurate facts and figures of the market in relation with the business in question. Obviously, this part also discusses various financial sources and their pros & cons.