Business Planning

Planning is the first and the most crucial step for starting a business. Business Planning lays down step-by-step procedure by which would function. The various functional requirements of business-marketing, finance, human resource and production, provide information to all the concerned people like employees, venture capitalists, etc. and it also draws a read map to help the entrepreneur run the business successfully. It is known to be the most crucial step in the successful running of the business because a well planned business venture carefully scans all the possible opportunities and threats, understand the demands of the market and arranges for the best possible resources which finally lead to the success of the business.

What is Business Plan?

It is outline of the business giving details of the finance, assets, staff, products or services and markets. It guides the entrepreneur, it identifies possible problems and it is also used in funding applications. The business plans sets out how to owner of a business intends to realize its objectives.

The business plan serves several purposes:

Enables the entrepreneur to think through the business in a logical and structured way and to set out the stage in the achievement of the business objectives.

Enables the entrepreneur to plot progress against the plan.

Ensures that the resources needed to carry out the strategy and the times when they are required are both identified.

Preparing the business plan ensures that the entrepreneur has thought through the crucial aspects of the venture.

It is a means for making all employees aware of the business direction.

It is an important document for discussion with prospective investors and lenders of finance.

It links into the derailed, short-term, one-year budget.

A good business plan would document short-term and long-term goals of the business and establish specific tasks for achieving theses goals. Planning is the process that never ends for a business and is extremely important in the early stages of the business. However, business planning and is extremely important in the early stages of the business. However, business planning is an ongoing process and it should be updated regularly to assist in forward planning, the challenge for the entrepreneur while preparing a business plan is to communicate his ideas and identify gaps in management information about their business, competitors and the market. For any organization, various functional plans-marketing, financial, human resources, production-have to be laid down, even though all the functional plans serve different purposes and all theses plans provide guidance and structure to the successful running of the business.

Preparing a Business Plan:

A business plan has to be in accordance with the organization in question, its situation and time. However, a business plan is not just a document to be produced and filed. Instead, business planning is a continuous process. The business plan has to be a living document, constantly in use of monitor, control and guide the progress of a business.

Before the preparing the plan, the entrepreneur should:

Review previous business plans (if any) and their outcome. This review will help highlight which areas of the business have proved difficult to forecast historically.

Be very clear as to objectives on which their plans will be based.

Set out the key business assumptions on which their plans will be based.

“Take the critical look at their business. The classical way is by means of the strengths, weaknesses, opportunities, threats (SWOT)” (*1)

Business planning process

As discussed above, a successful entrepreneur lays down a step by step plan that he/she follows while starting a new business. This business plans acts as a guiding tool to the entrepreneur and is dynamic in nature – and needs continuous review and updating so that the plan remains viable even in the changing business situations. The various steps involved in business planning process are:

Idea Generation

Environmental scanning

Feasibility Analysis

Drawing up a Functional Plan

Project report preparation

Evaluation, control and review.

Drawing functional Plan:

After positive result form the feasibility study, functional plans are drawn up. Some scholars and writers prefer to include feasibility study with functional plan but the two have been taken separately. Whereas only after the feasibility study can one go into the derails of drawing up functional plans which would determine the strategies for all the operational areas : marketing, Finance and production.

Marketing Plan:

Marketing plan lays down the strategies of marketing which can lead to the success of business. These strategies are in terms of marketing mix (product, price, place and promotion). From the market feasibility study and marketing research, potential/ present demands of customers are determined which helps in understanding the profile of customers and hence help in laying down the strategies for segmentation of the market, identification of the target market laying down strategies for target market.

Production/ Operation plan:

The production/ Operation plan should include strategies for the following parameters:

· Location and reasons for selecting the location.

· Physical layout

· Cost and availability of machinery, equipments, raw material

· List of suppliers and, if possible, distributors

· Cost of manufacturing

· Quality management

· Production scheduling, capacity management and inventory management.

· Changes in above in the case of expansion of business.

Financial plan:Financial plan indicates the financial requirements of the proposed business enterprise such as:

Projected cash flows

Projected income statement

Projected break-even point

Projected ratios

Projected balance sheet

Project report preparation:

A successful project report must achieve the following objectives:

Be appropriately arranged, with an executive summery, a table of contents and its chapters in correct order.

Be the right length and have the right appearance.

Give a sense of what you and your company expect to accomplish.

Explain in quantitative and qualitative terms, the benefits to the user of your company products and services.

Present hard evidence of the marketability of the products and services.

Describe the manufacturing or operating process and associated costs.

Contain believable finical projections, with key data explained and documented.

Show how investors can cash out in three to seven years, with appropriate capital appreciation.
Advantages of business planning:

Potential benefits realized from the development of a business plan include:

· Improved understanding of opportunities, problems and weaknesses.

· Greater control over the organization.

· A valuable source of information about your business that may be required by third parties.

· Improved use of your company personal resulting from participation in the business planning process.

· Increased employee motivation.

· Increased profits and sustained growth.