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What Is Business Planning?

Why Business Planning Isn't Just for Startups

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

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Business planning takes place when the key stakeholders in a business sit down and flesh out all the goals , strategies, and actions that they envision taking to ensure the business’s survival, prosperity, and growth.

Here are some strategies for business planning and the ways it can benefit your business.

Business planning can play out in many different ways. Anytime upper management comes together to plan for the success of a business, it is a form of business planning. Business planning commonly involves collecting ideas in a formal business plan that outlines a summary of the business's current state, as well as the state of the broader market, along with detailed steps the business will take to improve performance in the coming period.

Business plans aren't just about money. The business plan outlines the general planning needed to start and run a successful business, and that includes profits, but it also goes beyond that. A plan should account for everything from scoping out the competition and figuring out how your new business will fit into the industry to assessing employee morale and planning for how to retain talent.

How Does Business Planning Work?

Every new business needs a business plan —a blueprint of how you will develop your new business, backed by research, that demonstrates how the business idea is viable. If your new business idea requires investment capital, you will have a better chance of obtaining debt or equity financing from financial institutions, angel investors , or venture capitalists if you have a solid business plan to back up your ideas.

Businesses should prepare a business plan, even if they don't need to attract investors or secure loans.

Post-Startup Business Planning

The business plan isn’t a set-it-and-forget-it planning exercise. It should be a living document that is updated throughout the life cycle of your business.

Once the business has officially started, business planning will shift to setting and meeting goals and targets. Business planning is most effective when it’s done on a consistent schedule that revisits existing goals and projects throughout the year, perhaps even monthly. In addition to reviewing short-term goals throughout the year, it's also important to establish a clear vision and lay the path for your long-term success.

Daily business planning is an incredibly effective way for individuals to focus on achieving both their own goals and the goals of the organization.

Sales Forecasting

The sales forecast is a key section of the business plan that needs to be constantly tracked and updated. The sales forecast is an estimate of the sales of goods and services your business is likely to achieve over the forecasted period, along with the estimated profit from those sales. The forecast should take into account trends in your industry, the general economy, and the projected needs of your primary customers.

Cash Flow Analysis

Another crucial component of business planning is cash flow analysis. Avoiding extended cash flow shortages is vital for businesses, and many business failures can be blamed on cash flow problems.

Your business may have a large, lucrative order on the books, but if it can't be invoiced until the job is completed, then you may run into cash flow problems. That scenario can get even worse if you have to hire staff, purchase inventory, and make other expenditures in the meantime to complete the project.

Performing regular cash flow projections is an important part of business planning. If managed properly, cash flow shortages can be covered by additional financing or equity investment.

Business Contingency Planning

In addition to business planning for profit and growth, your business should have a contingency plan. Contingency business planning (also known as business continuity planning or disaster planning) is the type of business planning that deals with crises and worst-case scenarios. A business contingency plan helps businesses deal with sudden emergencies, unexpected events, and new information that could disrupt your business.

The goals of a contingency plan are to:

• Provide for the safety and security of yourself, your employees, and your customers in the event of a fire, flood, robbery, data breach, illness, or some other disaster
• Ensure that your business can resume operations after an emergency as quickly as possible

Business Succession Planning

If your business is a family enterprise or you have specific plans for who you want to take over in the event of your retirement or illness, then you should have a plan in place to hand over control of the business . The issues of management, ownership, and taxes can cause a great deal of discord within families unless a succession plan is in place that clearly outlines the process.

Key Takeaways

• Business planning is when key stakeholders review the state of their business and plan for how they will improve the business in the future.
• Business planning isn't a one-off event—it should be an ongoing practice of self-assessment and planning.
• Business planning isn't just about improving sales; it can also address safety during natural disasters or the transfer of power after an owner retires.

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What is a Business Plan? Definition, Tips, and Templates

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

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Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

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Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

• Business Plan Subtitle
• Executive Summary
• Company Description
• The Business Opportunity
• Competitive Analysis
• Target Market
• Marketing Plan
• Financial Summary
• Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

• Startup Business Plan
• Feasibility Business Plan
• Internal Business Plan
• Strategic Business Plan
• Business Acquisition Plan
• Business Repositioning Plan
• Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

• A detailed product description
• Market analysis
• Technology needs
• Production needs
• Financial sources
• Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

• Department-specific budgets
• Target demographic analysis
• Market size and share of voice analysis
• Action plans
• Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

• Relevant data and analysis
• Assessments of company resources
• Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

• How an acquisition will change its operating model
• What will stay the same under new ownership
• Why things will change or stay the same
• Acquisition planning documentation
• Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

• What the new owner will do to turn the business around
• Historic business metrics
• Sales projections after the acquisition
• Justification for those projections

6. Business Repositioning Plan

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

• Acknowledge the current state of the company.
• State a vision for the future of the company.
• Explain why the business needs to reposition itself.
• Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

• SWOT analysis
• Growth opportunity studies
• Financial goals and plans
• Marketing plans
• Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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Business Jargons

A Business Encyclopedia

Definition : Planning is the fundamental management function, which involves deciding beforehand , what is to be done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which lays down an  organisation’s objectives and develops various courses of action , by which the organisation can achieve those objectives. It chalks out exactly, how to attain a specific goal.

Planning is nothing but thinking before the action takes place . It helps us to take a peep into the future and decide in advance the way to deal with the situations, which we are going to encounter in future. It involves logical thinking and rational decision making.

Characteristics of Planning

• Managerial function : Planning is a first and foremost managerial function provides the base for other functions of the management, i.e. organising, staffing, directing and controlling, as they are performed within the periphery of the plans made.
• Goal oriented : It focuses on defining the goals of the organisation, identifying alternative courses of action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.
• Pervasive : It is pervasive in the sense that it is present in all the segments and is required at all the levels of the organisation. Although the scope of planning varies at different levels and departments.
• Continuous Process : Plans are made for a specific term, say for a month, quarter, year and so on. Once that period is over, new plans are drawn, considering the organisation’s present and future requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed and followed by another plan.
• Intellectual Process : It is a mental exercise at it involves the application of mind, to think, forecast, imagine intelligently and innovate etc.
• Futuristic : In the process of planning we take a sneak peek of the future. It encompasses looking into the future, to analyse and predict it so that the organisation can face future challenges effectively.
• Decision making : Decisions are made regarding the choice of alternative courses of action that can be undertaken to reach the goal. The alternative chosen should be best among all, with the least number of the negative and highest number of positive outcomes.

Planning is concerned with setting objectives, targets, and formulating plan to accomplish them. The activity helps managers analyse the   present condition to identify the ways of attaining the desired position in future . It is both, the need of the organisation and the responsibility of managers.

Importance of Planning

• It helps managers to improve future performance , by establishing objectives and selecting a course of action, for the benefit of the organisation.
• It minimises risk and uncertainty , by looking ahead into the future.
• It facilitates the coordination of activities . Thus, reduces overlapping among activities and eliminates unproductive work.
• It states in advance, what should be done in future, so it provides direction for action.
• It uncovers and identifies future opportunities and threats .
• It sets out standards for controlling . It compares actual performance with the standard performance and efforts are made to correct the same.

Planning is present in all types of organisations, households, sectors, economies, etc. We need to plan because the future is highly uncertain and no one can predict the future with 100% accuracy, as the conditions can change anytime. Hence, planning is the basic requirement of any organization for the survival, growth and success.

Steps involved in Planning

By planning process, an organisation not only gets the insights of the future, but it also helps the organisation to shape its future. Effective planning involves simplicity of the plan, i.e. the plan should be clearly stated and easy to understand  because if the plan is too much complicated it will create chaos among the members of the organisation. Further, the plan should fulfil all the requirements of the organisation .

Related terms:

• Strategic Planning
• Human Resource Planning Process
• Controlling
• Succession Planning
• Gap Analysis

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Table of Contents

Every year, thousands of new businesses see the light of the day. One look at the  World Bank's Entrepreneurship Survey and database  shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.   

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several  other statistics  expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all. 

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%)  don't have a formal business plan in place. 

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It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.  

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.  

Now before we begin with the details of business planning, let us understand what it is.

What Is a Business Plan?

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.  

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained. 

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes. 

Before getting into learning more about business planning, let us learn the advantages of having one.

The Advantages of Having a Business Plan

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

• Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals. 
• Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
• Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
• Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
• Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
• Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest. 

Now let's look at the various types involved in business planning.

The Types of Business Plans

Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.  

Here’s an overview of a few fundamental types of business plans. 

• Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
• Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments. 
• Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
• Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
• Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

The Key Elements of a Business Plan

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them. 

Here are the key elements of a good business plan:

• Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.  
• Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
• Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
• Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time. 
• Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

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Common Challenges of Writing a Business Plan

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

• Create a business plan to determine your company's direction, obtain financing, and attract investors.
• Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
• Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
• You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Become an Expert Business Planner

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success. 

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.   

Simpliearn’s Post Graduate Program in Business Analysis will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive training program combined with the latest tools and methods can pave the way for you and equip you with the skills and the know-how to tackle any real-world challenges that may arise. Completing this industry-recognized course also earns you a valued certification as tangible proof of your talent. 

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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Planning Definition

Everything you need to know about the definitions of planning. Planning is the first primary function of management, followed by other functions.

Planning is the process of deciding the objectives to be achieved and selecting the ways and means of achieving the pre-decided objectives.

We can say that it is a process of decision-making regarding what to do, how to do, when to do and who is to do. Even it precedes all managerial functions, but it is closely related to controlling. Planning is required for all organizations and also for every level of organisation. Therefore, Planning is prerequisite of effective management.

“Planning is deciding in advance what to do, how to do it, where to do it and who is to do it.

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Planning bridges the gap from where we want to go. It makes possible for things to occur while would not otherwise happen.” – Koontz and o’ Donnell.

Learn about the definitions of planning provided by eminent authors and management experts like Theo Haimann, Terry and Franklin, Henry Fayol, L.F. Urwick, Koontz and O’Donnell, Charles WL Hill Meshane, J.P. Barger, M.S. Hurley, Haynes and Massie, Peter F. Drucker, Hamilton Church, Alfred and Beatty, William H. Newman and Charles E. Summer Jr., Bill E. Goetz and Others.

Definitions of Planning in Management: Provided by Eminent Authors and Management Thinkers

Definitions of planning – provided by theo haimann, terry and franklin, henry fayol, l.f. urwick, koontz and o’donnell and charles wl hill meshane.

Planning is a pre-decided course of action which will be taken in future. It deals with the determination of objectives to be achieved and the activities required achieving the objectives.

Planning is a mental exercise that requires Imagination, forecasting and sound decision making; it requires a lot of thinking before doing. Planning is looking forward, anticipating the future and deciding the appropriate course of action to be taken.

Some important definitions of planning are given as under:

“Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for the future, attempting to achieve a consistent, coordinated structure of operations aimed at the desired results.” – Theo Haimann.

“Planning is selecting information and making assumptions regarding the future to formulated activities necessary to achieve organizational objectives.” – Terry and Franklin.

“The plan of action is, at one and the same time the result envisaged, the line of action to be followed the stages to go through and the methods to use.” – Henri Fayol.

“Planning is fundamentally a mental predisposition to do things in an overly way, to think before and to act in the light of the fact rather than of guesses.” – L. F. Urwick.

“Planning is deciding in advance what to do, how to do it, where to do it and who is to do it. Planning bridges the gap from where we want to go. It makes possible for things to occur while would not otherwise happen.” – Koontz and o’ Donnell.

“Planning is a process whereby managers select goals choose actions to attain those goals, allocate responsibility for implementing actions to specific individuals or units, measure the success of actions by comparing actual results against the goals, and revised plans accordingly.” – Charles WL Hill Steven Meshane.

Definitions of Planning –According to Eminent Management Experts: Theo Haimann, J.P. Barger, Koontz and O’Donnel, M.S. Hurley, Haynes and Massie and a Few Others

Planning is the determination of a future course of action to achieve any desired result. It is the process of thinking before doing. It depicts a framework within which other management functions will operate. It is a continuous process that takes place at all levels of management. Today, planning is considered as a strategic area of management in the context of globalization of business operations. It is a process of identifying the strengths and weaknesses of an organization and correlating them with opportunities available in the business world.

For proper planning, the following points should be decided in advance:

i. What is to be done in future?

ii. How it is to be done;

iii. Where it is to be done;

iv. When it is to be done;

v. By whom it is to be done.

Planning is the first function of management. Planning performs the functions of decision-making and problem-solving. In other words, planning involves the selection of business objectives and deciding the future course of action for achieving organizational goals. Therefore, planning is a process of determining objec­tives, discovering alternative courses of action, and choosing suitable methods for achieving desired objec­tives. Planning provides a rational approach to managerial activities. It brings orderliness, efficiency, and stability in managerial actions and decisions.

Definitions of planning given by eminent management experts:

‘Planning is deciding in advance what is to be done.’ – [Theo Haimann]

‘Planning is an ability to visualize a future process and its results.’ – [J.P Barger]

‘Planning is an intellectual process of conscious determination of actions, decisions, and considered esti­mates.’- [Koontz and O’Donnel]

‘Planning is the selection of objectives, policies, procedures, and programmes from among alternatives.’ – [M.S. Hurley]

‘Planning is deciding the best alternative to perform different managerial operations for achieving pre­determined goals.’ – [Henry Fayol]

‘Planning is an intellectual decision-making process in which creative thinking and imagination are essen­tial.’ – [Haynes and Massie]

‘Planning is a continuous process of making present entrepreneurial decisions systematically.’ – [Peter F. Drucker]

‘Planning is, in essence, the exercise of foresight.’- [Hamilton Church]

Planning is essential in every walk of life. Effective planning facilitates early achievement of objectives. It is a process of coping with uncertainty by formulating a future course of action. It attempts to anticipate the future in order to achieve better performance. It discovers the best alternative out of many available alter­natives. Growth and prosperity of an organization depends upon its successful planning. Planning helps the manager to shape the organization’s future. It brings rationality into the organization and ensures the most efficient use of scarce resources.

Definitions of Planning – Provided By Different Authors

Planning is deciding in advance what to do and how to do. It is the primary function of management.

Planning involves:

1. Setting objectives

2. Formulating an idea of how to work to achieve predetermined objectives

3. Bridging the gap between where we are and where we want to go

4. Evaluating alternative courses of action to select the most suitable one

5. Providing a rational approach to achieve predetermined objectives.

Therefore, Planning can be defined as a function of management which involves-setting objectives for a given time period, formulating various courses of action to achieve them, and then selecting the best possible alternative among the various courses of action available with an aim to achieve the set objectives most effectively and efficiently.

Definitions of Planning by Different Authors:

“Planning is the thinking process, the organised foresight, the vision based on facts and experience that is required for intelligent action.” – Alfred and Beatty

“Planning is chalking out plan of action, i.e., the result envisaged in the line of action to be followed, the stages to go through and the methods to use.” – Fayol

“Planning is deciding in advance what to do, how to do and who is to, do it. Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur, which would not otherwise happen.” – Koontz and Odennell

Definitions of Planning – With Meaning and Concept

Planning is a prerequisite of every management function, whether it is organising, staffing, directing or controlling. All these functions have to be preceded by a system of efficient planning otherwise the persons concerned with executing them will find it difficult to perform them systematically and efficiently, Planning enable to provide for the uncertain future. Planning is the most basic rock bottom function of management.

While performing the organisation function, the top management has to evolve the concept of proper flow of authority, responsibility among the superiors and the subordinates and also the extent of delegation of authority. Under staffing, the top management has to determine policies and programmes in respect of recruitment, selection, placement, training etc. The direction function can be performed efficiently, if the systems of communication and motivation are planned properly.

The performance of the control function is largely dependent upon the effectiveness of planning. The designing of control system starts with the formation of various plans.

Planning involves anticipation of future course of events and deciding the best course of action. It is basically a process of thinking before doing. To plan is to produce a scheme for future action, to bring about specified results, at specified cost and in a specified period. It is a deliberate attempt to influence, exploit, bring about and control the nature, direction, extent, speed and effects of change. It may even attempt deliberately to create change.

But, while incorporating changes, it should always be remembered that change (like decision) in any one sector may in the same way affect other sector. Broadly speaking, planning is a major cluster of activities in the management process and consists of formulating the objectives and the actions to be taken to achieve them. It is a process concerned with what has to be done and how it is to be done. Its focus is on laying down the ends and means.

Thus, there are two essential aspects of planning. Merely, selecting goals and targets to reach, is not planning. That is only one phase of his process. Other necessary phase involves selecting or designing appropriate techniques and procedures that will be instrumental in arriving at the goals. One without the other does not provide a plan.

Meaning and Concept of Planning:

Planning concentrates on setting and achieving objectives of an organisation. Planning is the first Management function to be performed in the process of management. It governs survival, growth and prosperity of any organisation in competitive and ever-changing environment. The planning function is performed by mangers at every levels of Management. It is necessary for discharging all other management functions.

Planning is a primary function of Management. It decides in advance, what to do, how to do it, when to do it and who is to do it. Planning bridges the gap between ‘where we are’ and ‘where we want to be.’ Planning is an intellectually demanding process. It requires the conscious determination of course of action and founding of decisions on purpose, knowledge and considered estimates. Planning is the determination of courses of actions to achieve the desired results.

It involves anticipation of future course of events and choosing the best course of action. Thus, it is a process of thinking before doing. We can say that planning is a systematic attempt to decide a particular course of action for the future. It leads to determination of objectives of the group activity and the steps necessary to achieve them.

In a way planning seeks to answer to the following questions:

What should be done?

Why is action necessary?

Where shall it he done?

Who will do it?

How will it be done?

What physical resources will he required?

Planning is deliberate and conscious research used to formulate the design and orderly sequence of actions through which it is expected to help to reaching its objectives. Planning chalks out a course of action for the enterprise to follow. Planning is a major cluster of activities in the managing process and consists of formulating the objectives and the actions to be taken to achieve them.

In other words, it can be said, Planning is an analytical thought process which covers:

i. Assessment of future,

ii. Determination of objectives and goals in the light of the future,

iii. Development of alternative courses of actions to achieve such objectives, and

iv. Selection of the best course of action and its alternatives

Planning in business is an ongoing process because changes in business environment are continuous. A business enterprise is not living in a vacuum. It is an open, adaptive social sub system living in a dynamic world, always trying to adapt itself to the ever changing conditions of demand, supply, prices, competition, technology, government policies etc. A plan is based on reliable information and not on emotions and feelings. It reflects vision, foresight and wisdom. It is a blueprint of action.

Planning is defined by different authorities as follows:

“Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.” – George Terry

“The process of planning covers a wide range of activities, all the way from initially sensing that something needs doing to firmly deciding who does, what, when. It is more than logic or imagination or judgment. It is a combination of all those that culminate in a decision- a decision about what should be done. The decision phase of planning is so important that we shall use the expression decision making as a synonym of planning.” – William H. Newman and Charles E. Summer Jr.

“The planning function determines organisational objectives and the policies, programmes, schedules, procedures and methods for achieving them. Planning is essentially decision making since it involves choosing among alternatives and it also encompasses innovation. That planning is the process of making decision on any phase of organised activity.” – Richard N. farmer and Barry M. Richman

Planning is fundamentally choosing and that, “a planning problem arises only when an alternative course of action is discovered.” – Bill E. Goetz

The selecting from among alternatives for future course of action for the enterprise as a whole and each department within it. – Knnontz and O’Donnell

However, they immediately indicate that planning is more than mere decision making, Planning does involve decision making and is intimately connected. Final selection from alternatives or decision making is merely a part of planning which depends on the existence of alternatives.

To conclude, planning is thus the first step in the management process concerned with the establishment of objectives and goals to be attained in the future in the light of an analysis of present limitations for attaining such goals with a view to their removal or deduction, anticipation of the future environmental factors and their impact and designing the course of action and programmes for attaining such preselected goals. It involves both thought and communication.

In fact Harwick and Landuyt described planning as “gan mesmanship” or the employment of a strategy in the pursuit of goals. They thus place special emphasis or imaginative thought, creativity and innovation.

Thus, planning involves thinking and analysis of information, arriving at certain assumptions in connection with what is likely to happen in the future and then formulating the activities required to achieve desired results or goals or objectives. The planner must be able to look into the future and conceptualize the proposed pattern of activities. Planning concerns the future. As Terry indicates, “Today’s, efforts are tomorrows work that the manager thought about yesterday”.

Planning thus deals with the proposed actions. Great emphasis is placed on planning by the modern managements which strive for their organisation’s survival, growth, prosperity and healthy mode of operations. A Manager desires to provide stability to his efforts by considering many complicated future variables, since the future involves change and uncertainty. Moreover, planning is necessary to achieve results through the efforts of others.

Hence, a manager must plan the efforts required to achieve the desired results. The main principle of planning is that adequate planning or mental exercise must take place before doing the physical efforts to accomplish a goal most effectively. Planning exists in all enterprises irrespective of their size. It is done consciously in some and unconsciously in others.

Since planning is a continuous and never ending activity, most managers re-examine plans regularly with a view to modify or adjust them promptly in the light of the new situations or conditions. Managerial planning draws up a blue print of activities to be undertaken. It is consciously choosing out of several given alternative of the objectives to be achieved, policies to be followed, rules and methods to be adopted, and ascertaining in advance the programmes, procedures and budgets so that they may serve as a guide to the action yet to be undertaken.

According to Alford and Booty? “Planning is the thinking process, the organised foresight, the vision based on facts and experience that is required for intelligent action.” Millet observes, planning is the process of determining the objectives of administrative effort and of devising the means calculated to achieve them. Planning is essentially an intellectual process of careful thinking and analysis of facts, considering estimates of past events and future trends.

It requires a difficult mental exercise, a keen foresight, analytical mind and broad based knowledge of facts. In planning, the manager must be able to manipulate abstract ideas and anticipate the impact of any possible outcomes which might affect the enterprise. Planning is pervasive. It is not an exclusive responsibility of the top management but is performed by each manager at every level in an enterprise.

Although the nature and scope of planning will vary with a manager’s authority, it is virtually impossible to circumscribe his area of choice, that he has no discretion in any of his actions. In fact, unless a manager has some function of planning, how so ever limited, it is doubtful that he is truly a Manager. In practice, the strategic and important planning’s are performed by managers enjoying wider authority and the lower level managers formulate their own plans within the framework of objectives set by the Management.

Business planning should be a way or mode of life essential to maintain the health of an enterprise. It demands a firm determination and conviction to plan constantly and systematically and business planning must be an integral part of the Management.

Definitions of Planning

Planning is the most basic of all management functions. Every manager plans no matter at what level he operates. It is through planning that he decides to do what to do when to do, how to do and who will do a particular task. It thus provides direction to the enterprise. In the absence of a plan, an enterprise would be like a ship without a rudder.

A planning attempt comprises of two factors- (a) improvement of the organisation within the boundaries that are laid down, and (b) questioning, evaluation and restructuring of boundaries themselves. In fact, testing and correcting the boundaries is a vital part of business planning.

Planning is not an activity; it is a process which involves selection from among many alternatives. It thus presupposes the existence of one or more alternative courses of action.

The concept of achieving desired results through planned action has developed to a sophisticated level, where it is no longer sufficient to manage through ‘ad hoc’ decisions if the greatest sufficient possible level of efficiency in the use of resources is to be achieved.

Planning must now be viewed as a series of logical interrelated procedures which can be evolved, taught, expanded and overlapped for a variety of different management purposes. The planning procedures which should be applied depending upon the management purposes which are chosen as those governing the achievement of a derived result.

Thus planning may be described as a continuous and deliberate attempt to set the goals of the enterprise.

Definition of Planning Function :

Planning is the process of determining the objectives of the administrative effort and of devising means calculated to achieve them. In other words, planning is the preparation for action. It is an endeavour to apply foresight to human activity, and is based on knowledge and research.

Richard T. Cass aptly puts it thus- “A plan is a statement by a person what he intends to do a certain thing by a certain means. Planning is the process by which he develops that statement”. Yet, James L. Pierce, a management expert and Vice-president of A.B. Dick and Company, looks at planning in another way.

To him, planning “refers to the construction of an operating programme, comprehensive enough to cover all phases of operations and detailed enough that specific attention may be given to its fulfilment in controllable segments”.

According to Alford and Beatty, “Planning is the thinking process, the organised foresight, the vision based on fact and experience that is required for intelligent action”.

Planning is therefore a feature of scientific management in operation. Planning is not, however, confined to industrial activity. This type of intellectual process is not associated with scientific management, or even with management as a whole. Thus, the prudent person plans his own financial affairs and provides for contingencies by pursuing a policy of thrift.

Thus planning is deciding what one will do about probabilities. It is the determination of a course of action to achieve a desired result. Thus a plan is ‘a projected course of action’.

According to Fayol, “The plan of action is, at one and the same time, the result envisaged, the line of action to be followed, the stages to go through, and methods to use. It is a kind of future picture, wherein proximate events are outlined with some distinctness, whilst remote events appear progressively less distinct.”

Planning includes forecasting, formulation or objectives, policies, programmes, schedules, procedures and budgets.

1. Policy, for which the plans must prescribe the detailed application. As policy is intended to ensure unity of action, so the plans defining the implementation of policy must pursue the same objective. When master plans are broken down into details so that the work of everyone concerned is governed by the separate parts of one over-riding theme, unity of action will result.

2. The efforts of all will be harmonised by working to plans having a common origin, the purpose of the coordination of strength, will be achieved. Individuals working separately find it difficult to attain what can be accomplished when their efforts are harmonised with others because only by following a determined plan are all imbued with a communal approach.

This is true of resources other than human one. Waste is avoided when plans have been correctly drawn up. The best utilisation of all resources will follow the coordination of effort.

3. Planning lies in the focusing of the efforts of everyone whose planned work is being directed. This again is in line with the policies basic to the plan. The attention of all will be directed to every aspect of their own work that is important to the overall objective. This avoids hesitation and prevarication because the efforts of all will be focused upon activities undertaken in the common interest.

According to Abraham Lincoln, “If we could first know where we are and from wither we are tending we could better judge what to do and how to do it”. This quotation will help us in understanding the work technique in planning.

The conclusion of the Second World War and the consequent enlargement of the buyers’ market put the business enterprises on a new footing, whereby scientific planning acquired new dimensions. During the past three decades, planning has become an area of incisive study.

The increased importance of business planning is the direct result of the dynamic environment in which an enterprise operates. The need for planning is accentuated because of the various changes at the micro-level which affect the growth and survival of the organisation.

Modern enterprises have just recognised the unlimited benefits of a wisely-constructed plan. One may, however, raise questions like what is the need for planning when in spite of careful planning, the enterprise suddenly encounters some unforeseeable disaster such as labour unrest or a drastic cut in it is less turnover.

These are few of the many instances when wisely-constructed a well-conceived plans of the enterprise are completely upset and when executive decisions are made daily to tide over the crisis. Such queries have been raised often in business circles. The hackneyed analogy of the captain charting his ship’s course is not really necessary to explain a simple idea.

It is, however, important to indicate that even when an enterprise is facing a crisis, the need for sound business planning cannot be underestimated. In fact, the situation is analogous to that of an aeroplane flying in a stormy weather. The pilot cannot dispense with the navigational instruments.

He recognises this and reconciles himself to the fact that, for the time being, they are less effective and re-establishes his course as quickly as possible. The same is the case with a business situation. A sudden crisis never lessens its importance. In fact, a well-established plan helps in appraising the effect of the crisis and in finding the means to meet it.

Definitions of Planning – According to Killen, Koontz, O’Donnell and Weihrich

Planning is the most basic of all management functions since it involves deciding of future course of action. The other functions of management, viz., organising, staffing, directing and control, must reflect proper planning. A manager organises, directs and controls to ensure the accomplishment of predetermined goals according to plans.

Thus, planning logically precedes the execution of all other managerial functions. Although all the functions intermesh in practice, planning is unique in the sense that it establishes the objectives for the group effort and lays down steps to accomplish them before the manager proceeds to perform other functions.

According to Killen, “Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be done and when it is to be done”. It is the determination of a course of action to achieve the desired results. It bridges the gap from ‘where we are’ to ‘where we want to go’. It makes it possible for things to occur which would not otherwise happen.

Planning is a mental process requiring the use of intellectual faculties, imagination, foresight and sound judgement. In the words of Koontz, O’Donnell and Weihrich, “Planning is an intellectually demanding process; it requires the conscious determination of courses of action and the basing of decisions on purpose, knowledge and considered estimates.”

Planning involves anticipation of future course of events and deciding the best course of action. It is basically a process of thinking before doing is a deliberate and conscious research used to formulate the design and orderly sequence of actions through which it is expected to reach the objectives. Thus, we can say that planning is a systematic attempt to decide a particular course of action for the future. It leads to determination of objectives of the group activity and the steps necessary to achieve them.

Definitions of Planning – With a Careful Analysis of the Definitions

Regardless of the size of the business or non-business unit, planning emerges as a critical management activity. Modern managers are facing the challenge of designing a sound action plan for their organisations to achieve their organisational goals. Planning gives a scientific direction to managers as to where the firm has to move to attain its objectives.

A good organisational plan minimizes risk, reduces uncertainties surrounding business conditions and it classifies the consequences of related action. Planning increases the degree of success and establishes co­ordinated effort in the organisation. It makes the managers future-oriented and their decisions co­ordinated. Good planning make the organisations reach their objectives.

Planning is a particular type of decision-making that addresses the specific future that managers desire for their organisations. It is the process of fixing goals of the business and finding the ways to attain these goals. Plan will help the managers to organise people and resources effectively. Plans develop confidence in managers.

Planning is the first managerial function to be performed in the process of management. It is concerned with deciding in advance what is to be done, when, where, how and by whom it is to be done. Thus, it is a predetermined course of action to achieve a specified aim or goal.

The definitions of planning given by the different writers are listed here.

In the words of Alfred and Batty, “Planning is a thinking process, the organised foresight, the vision based on facts and experience that is required for intelligent action.”

According to Koontz and O’Donnell, “Planning is essentially decision-making since it involves choosing from among alternatives.” According to George Terry, “Planning is the selecting and relating of facts and making and using of assumptions regarding the future in the visualisation and formulation of proposed activities believed necessary to achieve the desired results.”

A careful analysis of the above definitions of planning reveals that:

i. Planning is concerned with future and its essence is looking ahead;

ii. It involves thinking and analysis of information;

iii. It involves a predetermined course of action;

iv. It is concerned with the establishment of objectives to be attained in the future;

v. It is fundamentally a problem of choosing after a careful study of alternative courses;

vi. It involves decision-making;

vii. Its objectives is to achieve better results;

viii. It is a continuous and integrated process.

In every human activity, there is an element of planning. For instance, we find that the head of the family plans his expenditure, the housewife plans her daily chores, the teacher plans his teaching work, the student plans his studies and the farmer plans his agricultural activities.

In the business field, the need for planning is all the more because of various factors such as fluctuations in demand, growing competition, introduction of new products, scarcity of resources, changing technology, change in prices, government policy, etc. Organisational activity without a plan is likely to be ineffective and will drift without achieving success. Hence, planning is a must for business organisations.

A plan is a scheme which specifies the future resources and actions that an organisation needs in order to achieve its goals in an efficient and orderly way. It involves antici­pating future requirements and challenges. It also involves sequencing future resources and actions to minimise the delay and waste which could arise if events were allowed to take their natural pace and chronological order.

For example, a student might be set an assignment to produce a report within a week on, say, the impact of computers on marketing. A student who dislikes planning might immediately start work by borrowing a library book on computers and then spend the next two days extracting relevant information. The student may then attempt to borrow a book on marketing only to find that it is on loan and the recall will take two days.

After the book becomes available, it takes a day to extract and integrate the relevant information and to word process the assignment. Unfortunately, on the evening before the deadline it is discovered that the printer has run out of ink and paper. By the time ink and paper have been obtained the deadline has passed. By contrast, another student carefully notes the future deadline, anticipates the need for both books and orders them from the library sim­ultaneously.

At the same time this student checks the supplies of ink and paper and tops up her stocks in advance. Consequently this student does not waste three days’ waiting time. The assignment is submitted on the fourth day and the remainder of the week is spent on leisure activities. This example illustrates the essential features of planning.

(a) A goal – the desired future states an organisation intends to achieve

(b) An analysis of resources and stages

(c) An arrangement of stages to minimise unproductive time and waste

A number of other concepts are related to plans and planning:

i. Policies – guidelines for decisions and actions. For example, a policy of equal oppor­tunities which will guide the way employees make decisions about selecting, training and remunerating employees. Policies usually require people to interpret what to do in a specific situation.

ii. Procedures – step-by-step sequences of events needed to achieve short-term goals or specific circumstances. Often these are called SOPs (Standard Operating Procedures). Procedures usually involve a sequence of three or more actions.

iii. Rules – specific courses of action which must be followed. They involve little or no interpretation and frequently entail a single action. An example of a rule is, “all acci­dents must be reported to the Safety Officer”.

Definitions of Planning – With Meaning and Importance of Planning

William h. Newman on Charles E. Summer, Jr say that; the process of planning covers a wide range of activities all the way from initially sensing that something needs doing to firmly deciding who does, what and when – which shows that this is the process of decision making as a decision about what should be done? Decision phases of planning so important that we shall use the expression that decision-making is synonym of planning.

Richard N. Farmer and Barry M. Richman are of the opinion that- “the planning function determines organizational objectives and policies, programs, schedules, procedures and methods for achieving them.” Planning is essentially a decision-making since, it involves choosing among alternatives and it also includes innovation.

Billy E. Goetz says that Planning is fundamentally a process of choosing and that, “a planning problem arises only when an alternative courses of action is discovered”.

Koontz and O’Donnell describe planning as “the selection from among alternatives for future course of action for the enterprise as a whole and each department within it.” They also say that planning is mere decision-making. Planning does involve decision-making and being so intimately connected, decision-making has been treated under planning.

George Terry defines planning as “Planning is the selection and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.”

All the above clearly indicates planning involves selecting an optimal alternative among the available alternatives in the interest of the organization and this is done by the management (by a manager). It is clear that decision-making is one act of planning for decide what is to be done, when is to be done, by whom is to be done and how is to be done.

Planning is the first step in management process concerned with the establishment of objectives and goals to be achieved in the future in the light of an analysis of present limitations for attaining such goals with a view to avoid or reduction, anticipation of future environmental factors and their impact and designing the courses of action and programs for achieving the determined goals. In general, planning deals with proposed course of actions.

In today’s competitive environment and frequent changes in the industrial and business environment (both internal and external) a great emphasis is placed on planning by managements striving for survival, growth and healthy mode of operation. A manager desires to provide stability to his efforts by considering many complicated future variables, since the future involves change and uncertainty. Moreover the manager has to achieve the organizational goals through the efforts of manpower under him. Hence, a manager’s duty, as for planning is concerned to work in an uncertain future and viscous present.

Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be done and when it is to be done. It is the process of determining a course of action, so as to achieve the desired results. It helps to bridge the gap from where we are, to where we want to go.

It makes it possible for things to occur which would not otherwise happen. Planning is a higher order mental process requiring the use of intellectual faculties, imagination, foresight and sound judgement.

According to Koontz, O’Donnell and Weihrich, “Planning is an intellectually demanding process; it requires the conscious determination of courses of action and the basing of decisions on purpose, knowledge and considered estimates.”

Planning is a process, which involves anticipation of future course of events and deciding the best course of action. It is a process of thinking before doing. To plan is to produce a scheme for future action; to bring about specified results, at specified cost, in a specified period of time. It is deliberate attempt to influence, exploit, bring about, and controls the nature, direction, extent, speed and effects of change. It may even attempt deliberately to create change, remembering always that change (like decision) in any one sector will in the same way affect other sectors.

Planning is a deliberate and conscious effort done to formulate the design and orderly sequence actions through which it is expected to reach the objectives. Planning is a systematic attempt to decide a particular course of action for the future; it leads to determination of objectives of the group activity and the steps necessary to achieve them.

Thus, it can be said that planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.

Planning is thus deciding in advance the future state of business of an enterprise, and the means of attaining it.

Its elements are:

1. What will be done – What are the objectives of business in the short and in the long run?

2. What resources will be required – This involves estimation of the available and potential resources, estimation of resources required for the achievement of objectives, and filling the gap between the two, if any.

3. How it will be done – This involves two things – (i) determination of tasks, activities, projects, programmes, etc., required for the attainment of objectives, and (ii) formulation of strategies, policies, procedures, methods, standard and budgets for the above purpose.

4. Who will do it – It involves assignment of responsibilities to various managers relating to contributions they are expected to make for the attainment of enterprise objectives. This is preceded by the breaking down of the total enterprise objectives into segmental objectives, resulting into divisional, departmental, sectional and individual objectives.

5. When it will be done – It involves determination of the timing and sequence, if any, for the performance of various activities and execution of various projects and their parts.

Definitions of Planning – With the Key Elements of Planning

Planning involves selection of missions and objectives and the actions to attain them; it requires thinking, that is, selection from various alternative future courses of action. Plan, thus, provides a rational approach to achieve predetermined objectives. “Planning involves the determination of future course of action, that is why an action, what is to be done, how to be done, and when to be done. All these factors constitute the planning function. Planning bridges the gap from where we are and where we want to go.”

It makes it possible for things to occur that would not otherwise happen. Planning is an intellectually demanding process; it requires that we consciously determine courses of action and base our decisions or purpose, knowledge and considered estimates.

According to Koontz and O’Donnell, “Planning is an intellectually demanding process; it requires the conscious determination of courses of action and the basing of decisions or purpose, knowledge and considered estimates.”

Joseph Massie defined, “Planning is a process by which a manager looks to the future and discovers alternative courses of action open to him.” Massie clearly outlined that planning is a forecasting activity.

According to Allen, “Planning is a trap to capture the future.” It means planning decides/takes decision about every activity in the organization. “Planning is anticipating”, says Hamilton Church. At last we can say that planning is a systematic attempt to decide a particular course of action for the future.

George R. Terry concluded that, “Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualizing and formulation of proposed activities believed necessary to achieve desired results”.

On the basis of these definitions, the key elements of planning are:

(i) Process of forecasting,

(ii) Logical thinking involves decision-making,

(iii) Identifying strengths and weaknesses,

(iv) Evaluation of past and assessing the present,

(v) A sense of futurity,

(vi) Process of determination of objectives, and

(vii) Laying down pattern for the achievement of organizational objectives.

Planning may also be defined as a process of identifying strengths and weaknesses of an organization and matching them with the environmental threats and opportunities by developing a suitable course of action. An exercise of this nature is also a type of planning.

So, we can say that planning is a trap laid to capture the future only by analyzing the strengths and weaknesses of an organization and then the decision would have been made after matching them with the threats and opportunities. At last, planning provides spectrums of rays on various activities of the organization.

Related Articles:

• Comparison between Plan and Planning | Management
• Planning Benefits: 5 Key Benefits of Planning | Management
• 5 Main Steps Involved in the Planning Process
• 5 Primary Functions of Management

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How to Conclude a Business Plan

6 types of business plans, importance of following a business plan.

• What Is Business Plan Pro?
• Accounting Financial Summaries

Planning is needed to grow or start a business. The main source of planning for a company is the business plan. A business plan definition is a document that details the strategy of business owners on how they intend to run their business. There are several objectives that should be covered in a business plan from what the company's goals are to how many employees are going to be hired. Business plans provide a road map for where the owners want to take their businesses. It is also necessary to have if owners want to secure financing.

Benefits of Planning

Business plans are guides for owners to run their businesses. Problems facing owners while running their businesses (slow sales, not enough customers or clients) may be solved by analyzing the information detailed in their business plans. The meaning of business planning is that it can help owners focus marketing efforts and get back to basics when the business begins to expand, says the Small Business Administration. This breeds confidence into the business owner as they continue to grow their business.

Business Plan Features

A detailed business plan touches on several key areas. Business plans cover the company’s vision, names of management and how many employees are/will be hired, a description of the company and what product(s) or service(s) it provides. Business plans also outline the marketing research done to analyze the profitability of the company, marketing and sales strategies and financial projections, competition, records, funding amount requests and how the money will be used.

Planning Considerations

There are several types of business plans that are used for different situations. The main difference between plans is the amount of details that's produced. Some plans outline just the bare facts (mini-plans) while others, such as working plans, which are viewed internally by company management, and presentation plans, which are produced for investors and lenders, detail more facts and data. Business plans should be error free and tailored for the situation. Investors looking for graphs, charts and financial projections to make a final decision won't be satisfied with a mini-plan.

Significance of Planning

Not only do business plans breed confidence in owners, but in lenders as well. Business plans are one of the main requirements for owners to have when they’re applying for business loans. Some lenders require business plans along with other documents such as bank statements as part of their business loan application. Detailed business plans prove to lenders that owners are very knowledgeable and serious about their businesses, according to Free Management Library . If the rest of the application meets their approval, the business plan could be the difference for the owner to secure a business loan.

Planning Misconceptions

Although a business plan was created at the start of the business venture, it is necessary to review it from time to time and make changes as the company evolves. A yearly review or a review when the company undergoes growth or significant changes is needed. The same objectives that were important two years ago may not be significant when new goals have replaced old ones. Owners should update their business plans by incorporating changes as much as possible to keep them current.

• Free Management Library: All About Business Planning: Complete Manual With Updated Extensive Resources

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What is Strategic Planning? Definition, Examples and Process

By Paul VanZandt

Table of Content

What is Strategic Planning?

Strategic planning models, strategic planning process: 6 key steps.

Strategic planning is defined as an organizational effort to lay out the mission goals and objectives for the company, with a typical time period of 2-5 years. A strategic plan takes into account the current state of affairs in the enterprise, wider legislation and business environment, company’s products, departments, profit /loss margins and budget distribution. 

Strategic planning first entered business environments in the post-war period of the 1950s, and has been so effective that it is still widely used and applied across organizational spectrums, including non-profits.

While a strategic plan is the final outcome of the strategic planning process, here are the key factors and components that feed into creating this plan:

1. Profitability and balance sheet management

For any business, profitability and the adjacent balance sheet management is and always should be a key factor to be taken into consideration during strategic planning, nvariant of the size of business. Both these factors are in fact co-dependent. For example, one of the key outcomes of a strategic plan is to set the revenue growth percentage to be achieved each year for, say, 3 years. This in turn will require evaluation of the balance sheet, including any debt payments, dividend payout, shareholder expectations etc. 

Even if the business is a startup and is rich with investor cash to spend in acquiring customers in the short to medium term, it is still aspiring to be profitable and must lay out a larger strategic path to profitability.

2. SWOT analysis outcomes

Strength, weaknesses, opportunities and threats – these are the outcomes and full terms of the abbreviated term, SWOT analysis. Strength refers to the business factors that indicate key factors that are contributing to the achievement of business outcomes. These may be factors related to sales, employee and talent retention, software stack, business efficiency etc. Similarly, weakness refer to factors that are holding back the growth and achievement of business outcomes, such as poor margins, lack of company data management, employee attrition etc. 

Opportunity refers to areas in the business environment that the business can potentially explore. For example, one of the opportunities identified could be sales in a new market, implementing a better human resources management model, branching into new products and/ or services, etc.

3. Operations management

Operations management pertains to the cohesive movement of all moving and communicating parts to produce the company’s products or services. While creating a strategic business plan, management needs to take into account how each department and team will need to interact with each other to produce the results desired as outcomes in the strategic plan. This includes ensuring the right technology stack needed for each team including communication and collaboration technology needed for remote and on-premise task execution.

4. Human resource management

Strategic planning involves taking into account all aspects HR and employee related spending and policies. One of the key aspects of a strategic plan must be to ensure a harmonious work experience for employees such that it increases employee retention and helps build an environment that enhances employee productivity and workplace satisfaction.

Importance and Benefits of Strategic Planning

A strategic plan is more than just a business tool, it also plays a key role in defining operational, cultural and workplace ethics. Here are some of the key aspects of the importance of strategic planning:

• Provides a unified goal 

A strategic plan is like a unified action plan for the whole company in order to achieve common outcomes. For example, a strategic plan to achieve a certain revenue growth each year requires sales, account management, product development and marketing teams to work together to ensure a seamless lead pipeline, customer upsells and account retention, meet customer expectations etc.

• Adds to management transparency

Strategic planning is more than just for direct business growth, it also helps shine clarity to employees and shareholders as to what their mid-to-long term objectives are and how their actions are derived from these larger goals. Such a plan must always be referenced for citation and justification for key business moves and decisions to make it apparently justified and based in logic and reason. This also encourages team leads and employees to in-turn be more transparent with their team-members and peers with their plans and goals. 

One of the issues most dreaded by investors and employees alike is a management that seems to take random decisions without any clear guidance on how they help meet requirements for the final business objectives or tackling the challenges of the day. A strategic plan helps build investor and employee confidence in the management and adds to build a culture of transparency in day-to-day business operations.

• Identifies hidden strengths and weaknesses

Many strengths and weaknesses in a company may be contributing, yet hidden factors in the path to meeting or hindering the meeting of business goals. A strategic plan’s primary input is a SWOT analysis of the company, which is conducted by auditing the firm to recognize and list strengths and weaknesses within the company. These may be a competitive product, a better monetization model, a weak employee incentive policy etc. 

The important step here is the actual deep analysis and listing down of these strengths and weaknesses and how they can be leveraged or minimized.

• Leads to better financial health

A company with a clear strategic plan is able to better plan expenses and set right expectations on return-on-investment (ROI). It takes into account balance sheets, profitability, accounting and expense management, all of which contribute to better bookkeeping and financial health of the company.

• Improves management-employee relations

Employees and teams work in silos when the management works in silos. But when a company shares a strategic plan with employees and lays out exactly how each team will be working towards contributing to this larger plan, it gives each team and its members a sense of belonging and importance within the larger company, In today’s environment of hybrid or remote work cultures, it is a key step to ensuring that the company remains cohesive and collaborative in getting work done and meeting final objectives.

Learn more: What is Tactical Planning?

Strategic planning inputs may require one of many of the following business analysis models:

• SWOT analysis

SWOT analysis is the process and visual template for identifying and listing a company’s strengths, weaknesses, opportunities, and threats. These are cornerstone considerations for any leadership team and play a key role in the strategic planning process. 

• Business model canvas 

A business model canvas is a process used to identify and represent existing business models of an enterprise, and develop new models to better meet company goals and objectives. Like SWOT analysis, business model canvas is also a standard business template.

• PESTEL analysis

PESTEL is an abbreviation for political, economic, social, technological, environmental and legal, and PESTEL analysis aims to identify the impact of these external factors on a business. 

• Cost-benefit analysis

A cost-benefit analysis is a method of evaluating an investment in the business based on the benefits it would bring to the table. This is a good method for ensuring a healthy financial balance sheet where spending and budgeting is carefully analyzed to ensure only those investments that bring back reasonable ROI.

Most companies have 2 or more products/ services streams, or even 2 or more businesses. A BCG matrix is a visual process of managing an enterprise’s portfolio by prioritizing profitable companies with good market share and growth. 

An effective strategic planning process requires the following key steps:

• Identify core business objectives

Strategic planning begins with first identifying your business objectives- what does it produce? What does it do better than competition? What is the quality-profitability balance? These are examples of the questions that need to be asked to identify core business objectives. The strategic planning tools can be applied at any stage of the planning process to help answer these questions.

• Identify objectives of each department

Once the core business objective is ready, it needs to trickle down to an execution plan that involves each department. This in turn will result in breaking-down of the core objectives to smaller objectives for the teams. This needs to be laid out with clarity and precision since the team leaders will further use this team goal to assign individual targets for members. 

• Identify potential road-blocks

Before formulating the final strategy, it is important to discuss it with relevant leaders in the company to ensure an error-free process that is achievable with minimal roadblocks. Ofcourse, as the execution work begins, the management should be flexible enough to absorb unforeseen and small issues which are inevitable. The goal here is to avoid any big boulders which may cripple the strategy at a later stage, such as data security, pricing estimations, hiring new employees or expansion to new departments/ teams, investment in new product development, mergers and acquisition plans etc.

• Formulate the final strategy

Once the objectives and goals have been scanned for potential roadblocks and alterations/ safeguards have been accommodated, this is the first draft of the final strategic plan for the company. This strategy may be applicable for the foreseeable future or have a specific deadline, it should however be pulled up for revision annually. For small companies or startups who have much to learn on the way, they need to keep an active eye on the larger strategy based on changing business realities. 

• Re-evaluate based on feedback

Before you iron out the processes and policies that will enable the execution of the new strategic plan of the company, it is important to hear back from your employees. This doesn’t have to be every single employee, especially if you have a large team, but to the extent possible. You may at first discuss the strategy with team leaders, who if needed, may take it further down the chain to their own team members and absorb their feedback. Complete agreement may not be possible, but it is important that both sides remain flexible while discussions are on but must be prepared to execute once the discussions are over.

• Set or revise adjacent policies and processes

Now that the strategic plan for the business is complete and sealed, the leadership team needs to start the execution with necessary changes to the processes and policies as the need may be. This may need to include data management process changes, technology stack updates, issue escalation matrix etc. In some cases it may not require any change, and the right processes may already be in place with just a new direction based on the strategic plan. 

Learn more: What is Enterprise Planning?

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What is Planning?

Planning is the primary function of management. It is the outline of the activities to be done in the future predetermined goals. It means looking ahead and chalking out the future course of action.

Meaning and Definition of Planning

Planning is concerned with deciding in advance what, when, where, why and how is to be done and who shall do it. Thus, planning is the process of setting goals and choosing the means to achieve those goals.

It is also defined as the process of choosing among alternatives. It is thinking before doing. It is a preparatory step for the action that is to follow. In fact, planning is the outline of future activities to be done for achieving predetermined goals.

Without plans managers cannot know how to organize people and resources effectively for achieving Simply, planning is the process by which managers define goals and take necessary steps to ensure that these goals are achieved. Goals imply a desired future state.

Planning arises from the recognition that some intervention is needed to bring about a change from the current or present state to some desired or alternate future state.

The difference between the present level and e future state is commonly known as strategic gap. It requires time and preparation to bridge this gap. This process is shown in the following below feagure:

Simple Planning Model Planning is a mental process which covers:  

• assessment oft the future
• determination of objectives in the light of future
• development of alternative courses of action to achieve such objectives, and
• selection of the best course of action among these alternatives.

Hence, it is blue-print for action. Without planning other functions become mere activity producing nothing but chaos.

Some of the important definitions of planning are given below:

According to Koontz and O'Donnell, "Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges gap from where we are to where we want to go".

In the words of Mary Cushing Niles , "Planning is the conscious process selecting and developing the best course of action to bridges gap from where we are to where we want to go" accomplish an objective".

ME. Hurley regards that, "Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures and programs from among alternatives".

According to Harold Koontz and Heinz Weihrich , "Planning involves selecting purposes and objectives of the actions to achieve them; it require decision making, that is choosing from among alternative future courses of action".

A careful analysis of above Definitions of Planning reveals that:

• planning is concerned with future and it is looking ahead.
• it involves thinking and analysis of information.
• it involves a predetermined course of action.
• it specifies the objectives to be attained in the future it is basically a problem of choosing from alternative courses of action.
• it involves both decision making and problem solving.
• it is thinking before doing.
• its objectives are to achieve better results.

Importance of Planning

Planning is definitely significant as it directs us where to go, it furnishes direction and decreases the danger of risk by making predictions. The significant advantages of planning are provided below:

Planning provides directions :

Planning assures that the objectives are certainly asserted so that they serve as a model for determining what action should be taken and in which direction. If objects are well established, employees are informed of what the company has to do and what they need do to accomplish those purposes.

Planning decreases the chances of risk :

Planning is an activity which permits a manager to look forward and predict changes. By determining in prior the tasks to be completed, planning notes the way to deal with changes and unpredictable effects.

Planning decreases overlapping and wasteful activities :

Planning works as the foundation of organising the activities and purposes of distinct branches, departments, and people. It assists in avoiding chaos and confusion. Since planning guarantees precision in understanding and action, work is conducted on easily without delays.

Planning encourages innovative ideas :

Since it is the primary function of management, new approaches can take the form of actual plans. It is the most challenging project for the management as it leads all planned actions pointing to growth and of the business.

Planning aids decision making :

It encourages the manager to look into the future and make a decision from amongst several alternative plans of action. The manager has to assess each option and pick the most viable plan.

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

That just scratches the surface for why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those that are ready to start a business. It’s just as valuable for those that have an idea and want to determine if it’s actually possible or not. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

Document your strategy and goals

For those starting or managing a business understanding where you’re going and how you’re going to get there are vital. Writing your plan helps you do that. It ensures that you are considering all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll have an idea of where you want your business to go as well as how you’ve performed in the past. This alone better prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

This will be the first part of your plan but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps .  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add it. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing the viability of your business. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex on the surface, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

• Sales and revenue projections
• Profit and loss statement
• Cash flow statement
• Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first and only add documentation that you think will be beneficial for anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. So, to get the most out of your plan, it’s best to find a format that suits your needs. Here are a few common business plan types worth considering. 

Traditional business plan

The tried-and-true traditional business plan is a formal document meant to be used for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

Business model canvas

The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan. This format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Now, the option that we here at LivePlan recommend is the Lean Plan . This is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

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Planning in Management: Definitions, Importance, Characteristics, Process

• Post last modified: 10 August 2023
• Reading time: 35 mins read
• Post category: Management

What is Planning?

Planning is the primary function of management that involves formulating a future course of action for accomplishing a specific purpose. Planning enables managers to decide what task to do, how to do the task, when to do the task and by whom the task has to be done.

Table of Content

• 1 What is Planning?
• 2 Definitions of Planning
• 3.1 Forms Goals
• 3.2 Remains as a Continuous Process
• 3.3 Gives Direction
• 3.4 Tackles Uncertainty
• 3.5 Minimises Duplication and Wasteful Activities
• 3.6 Supports and Promotes Innovative Ideas
• 3.7 Facilitates Decision Making
• 3.8 Sets Standards for Controlling Function
• 3.9 Facilitates Coordination
• 4.1 Continuous Process
• 4.2 Intellectual Process
• 4.3 Futuristic Approach
• 4.4 Flexible process
• 4.5 Primary Function of Management
• 4.6 Assists Decision Making
• 4.7 Goal-oriented Approach
• 4.8 Pervasive
• 5.1 Setting Organisational Objectives
• 5.2 Examining Business Environment
• 5.3 Assessing Available Alternatives and Selecting the Most Appropriate Alternative
• 5.4 Formulating secondary plans
• 5.5 Ensuring cooperation and participation
• 5.6 Following up
• 6.1 Time-consuming
• 6.2 Expensive
• 6.3 Gap Between Targets and Results
• 6.4 Resistance Towards Change
• 6.5 Paperwork
• 6.6 Reason of Frustration
• 6.7 Problem of Over-target
• 7.1 Strategic plans
• 7.2 Tactical plans
• 7.3 Operational plans
• 7.4 Contingency plans
• 8.1 What is Planning?
• 8.2 What are the Features of Planning?
• 8.3 What is the Process of Planning?
• 8.4 What is the Importance of Planning in Management?
• 9 Management Topics

To be more precise planning lays a foundation for establishing a mission statement, defining organisational goals and determining resources needed to achieve organisational goals. On the other hand, in a narrow sense, planning is the tactic to complete a specific task.

Definitions of Planning

By going through the definitions of planning we will be able to understand its concept therefore some definitions are as follows:

Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge their futurity, organising systematically the ef- forts needed to carry out these decisions and measuring the results of these decisions against the expectation through organised systematic feedback. Peter Drucker

Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are, where we want to go. It makes possible things to occur, which would not otherwise occur. Koontz and O’Donnell

Importance of Planning in Management

The importance of planning in management is explained in the following points:

Forms Goals

Remains as a continuous process, gives direction, tackles uncertainty, minimises duplication and wasteful activities, supports and promotes innovative ideas, facilitates decision making, sets standards for controlling function, facilitates coordination.

Planning is a goal-oriented process that helps in determining what each individual in an organisation has to achieve at the end and executing work accordingly. In addition, the planning function enhances the efficiency of other managerial functions.

Planning in any organisation is a never-ending function. This is because every organisation operates in a dynamic business environment which is subject to frequent changes. As new changes become known, revisions and amendments are made to plans.

Planning channelises the efforts of people in an organisation in the best possible manner to attain the desired results. For example, during the planning process, plans are laid for each department of the organisation, which helps people at all levels to know exactly what work they have to perform so that organisational goals can be achieved without any hindrances.

Planning is helpful in making predictions with the available amount of information. This helps organisations/businesses tackle an uncertain future. Planning assists in finding a better way to achieve goals by anticipating a future risk or chances of occurrence of future risks.

As mentioned earlier, planning helps individuals at all levels to know what they exactly need to do. This helps in preventing the duplication of work, authority, responsibility, etc. As a result, wastage of resources and efforts is minimised.

Nowadays, organisations operate in an environment of cut-throat competition. Customers always demand something new or unique. If an organisation fails to fulfil customers’ demands, customers can easily switch to competitors.

Planning enables managers to think out of the box, generate new ideas and provide something unique to customers with less cost and more efficiency, thereby satisfying customers.

Planning as a guide plays an important role in making efficient and accurate decisions. For instance, the production department of an organisation needs to choose between two vendors who supply raw materials at the same cost and of the same quality level.

However, the two vendors differ in delivery time. In this case, the decision of choosing the vendor will be made as per the planned number of days.

Planning and controlling are inter-related functions of management. Planning sets goals for the organisation and controlling ensures their accomplishment within the decided time period. In addition, controlling direct the course of planning by highlighting the areas where planning is required.

The planning function helps management in aligning department-wise activities of the organisation. The plans made by one department are understood and supported by another department.

Overall planning that is done by top management facilitates departments to coordinate and plan accordingly to achieve organisational goals.

Characteristics of Planning

The characteristics of the planning function are explained as follows:

Continuous Process

Intellectual process, futuristic approach, flexible process, primary function of management, assists decision making, goal-oriented approach.

Planning is done for a specific period of time and plans are reformed at the end of that specific period as per the new requirements and changing conditions. Planning goes on, till the existence of an organisation, as issues and problems keep cropping up, and plans are needed to tackle the problems effectively.

Planning requires creative thinking to visualise the future situation and frame plans accordingly. It is the outcome of managers’ thinking process based on their experience and knowledge.

Planning is conducted to achieve future organisational goals while efficiently utilising organisational re- sources. This is done by predicting future situations and making forecasts.

Planning involves a flexible approach. Since the future is uncertain and unpredictable, changes in the business environment take place in the form of competition, government policies, customer demand, etc. Thus, there is always room for flexibility in planning to incorporate future changes.

Planning is done prior to all other functions of management, i.e., organising, staffing, directing, controlling, coordinating, reporting and budgeting. It is the first, foremost and base managerial function of any organisation. The effectiveness of a management’s plan determines the competence of the management’s activity for the planned time period.

Planning comprises decision making because it is an activity of making choices from the available alternatives for performing tasks. Hence, planning comprehends decision making as its indispensable part.

Planning emphasises defining the aims, objectives and goals of the organisation. It also involves the identification of alternative courses of action to decide on a suitable action plan, which should be undertaken for the attainment of goals.

Planning is regarded as pervasive because it is present in all the segments of an organisation. It is required at all levels of management. The scope of planning differs at different levels of management and departments.

Process of Planning

The process of planning involves a number of steps in chronological order which are given below:

Setting Organisational Objectives

Examining business environment, assessing available alternatives and selecting the most appropriate alternative, formulating secondary plans, ensuring cooperation and participation, following up.

The planning process begins with the first step of establishing organisational objectives. It involves identifying organisational goals to be achieved by examining internal and external business conditions. For this, the answers to be given for the following questions:

• What is to be achieved?
• What actions are to be taken?
• Who is to perform it?
• How is it to be undertaken?
• What should be the time frame?

The next step in the planning process is to examine internal and external factors that influence the business environment.

The internal factors include strengths and weaknesses (for example, the efficiency of available resources) of the organisation, while external factors involve threats and opportunities (for example, overall economic and industrial environment and competitive position of the organisation).

The next step in the planning process is to evaluate all available alternatives and then select the best alternative. Generally, an alternative is evaluated against risks associated, costs involved, upcoming benefits, etc.

The successful accomplishment of organisational objectives is confirmed by formulating secondary or alternative plans. These plans are derived for various activities, units, departments, etc., and indicate a sequence in which various tasks are to be performed and the time schedule for per- forming those tasks.

In this step, employees at middle and lower levels of management are encouraged to participate in the successful accomplishment of organisational goals. Suggestions were given by operating personnel to help the management rectify shortcomings in plans and set things right at the start of the planning process and at the time of its implementation.

The last step in the planning process is to provide the scope of follow-up for determining the value of plans made and implemented. This step involves a continuous review of plans for ensuring their relevance and effectiveness.

Reviewing plans on a continuous basis helps the organisation develop sound plans for the future and avoid mistakes that took place while implementing the previous plans.

Limitations of Planning

In spite of several advantages, the planning function also has certain limitations. We have here listed the key limitations of planning :

Time-consuming

Gap between targets and results, resistance towards change, reason of frustration, problem of over-target.

Planning turns out to be a time-consuming activity as it requires data collection, data analysis, forecasting, etc., for selecting the best future course of action.

Planning requires expertise and the collection of authentic data, which incurs a lot of costs for the organisation. For instance, companies like IBM need to do a lot of planning prior to starting any new venture. For this, such companies also spend a lot on research and pay highly to experts to get their advice.

Planning is done by top-level management and implemented by middle and lower-level management. This creates a gap between the plan set and actual results achieved as different employees may have different perceptions of accomplishing plans.

Planning often requires changes due to the dynamic business environment. However, as a natural human tendency, employees are always reluctant to accept changes and may not provide their full cooperation.

Planning involves paperwork as plans cannot be finalised in one go. The plans are reworked again and again and after getting a final plan, subordinates give the copies of the plan to the top-level management in the form of a report or a proposal to get the plans finalised for implementation.

Sometimes, planned targets are not achieved by managers and employees irrespective of their best efforts. Such failures frustrate them and cause a low level of motivation in them.

Planning sometimes makes the top-level management fix targets that are unachievable and causes problems of over-expectation from employees.

Types of Plans

Plans bind individuals, resources, departments and organisations to achieve specific goals in the future. Plans help design organisational goals effectively which fits into the hierarchy from top to lower level of management. In an organisation, there are different types of plans made.

Some important types of plans are explained as follows:

Strategic plans

Tactical plans, operational plans, contingency plans.

Strategic plans are a framework for an organisation. These plans contain the mission of an organisation and outline goals to be achieved. Strategic plans aim to turn the vision of an organisation into reality. Thus, strategic plans are long-term and forward-looking in nature and accommodate future growth and expansion of an organisation. These plans are generally developed by top management and are implemented by middle and lower management.

For instance, Varun works as a top-level manager for Dino’s PizzaSizz. As a top-level manager, he has to make use of strategic planning to ensure that the long-term goals of the organisation are attained. Varun in consultation with other top-level managers developed strategic plans for achieving growth, increasing productivity and profitability and boosting return on investments, as all these are parts of the desired future of the pizzeria.

Varun and other top-level managers developed organisational objectives through strategic plans so that middle- and lower-level managers can create compatible plans aligned with those objectives. Varun also involved other level personnels because strategic plans require multilevel involvement.

Tactical plans are developed by middle-level management for a span of generally less than three years. These plans contain instructions for lower-level management on what should be done, how should be done and by whom should be done. In addition, tactical plans define tactics which managers adopt for achieving objectives mentioned in the strategic plan. Tactical plans also provide information on resources to be employed and work distribution among the sublevels within each department.

For instance, when Mira, the middle-level manager at Dino’s PizzaSizz, learns about Varun’s strategic plan for improving productivity, Mira im- mediately began to think about possible tactical plans. Tactical planning for Mira included things like testing a new process in making pizzas in a shorter amount of time or perhaps looking into purchasing a better oven that can speed up cooking pizza or even exploring ways to better map out the delivery routes and drivers.

As a tactical planner, Mira required to form a set of calculated actions that takes a shorter amount of time and is narrower in scope than the strategic plan but still help to bring the organisation closer to its long-term goal.

An operational plan is developed by the supervisors, team leaders and facilitators for supporting tactical plans. It governs the day-to-day operations of an organisation/business. Operational plans can be of two types, namely single use plans (for example, budget) and ongoing plans.

For instance, Ravi, the frontline manager at Dino’s PizzaSizz, has the responsibility of operational planning. Scheduling employees each week, creating a monthly budget, developing a promotional advertisement for the quarter to increase the sales of a certain product or outlining an employee’s performance goals for the year and doing an assessment, ordering and stocking inventory are the operation plans Ravi need to make and get executed.

A continuing or ongoing plan is the one which is made once and its value is retained over a period of years. The plan undergoes periodic revisions and updates. Following are examples of on-going plans:

• Policy : A policy is a broad guideline followed by managers to deal with the important aspects and areas of decision making. Policies are referred to as those general statements which explain how managers should handle their routine management responsibilities. For example, a typical human resources policy of an organisation addresses the matters related to the hiring of employees, terminations of non-performing employees, performance appraisals as an important culture, pay increases and discipline of employees.
• Procedure : A procedure is a standard set of directions that provides stepwise instructions of carrying out activities or tasks for achieving and attaining the organisational objectives. For example, typically, organisations have procedures/processes to purchase supplies and equipment. The procedure of purchasing supplies and equipment generally starts with a supervisor who completes the purchase requisition. After that, the requisition is then sent for approval to the next level of management. As the requisition gets approved, it is forwarded to the purchasing department. The amount of the purchase requisition is considered by the purchasing department either to place an order or to secure quotations bids from several vendors before placing the order.
• Rule : A rule is a statement that explicitly guides employees for what they can and cannot do. Rules promote the safety of employees by placing the ‘do’ and ‘don’t’ statements. It also directs for the uniform treatment and the behaviour of employees in an organisation/business. For example, the rules of absenteeism and unpunctuality allow supervisors to make discipline related to fair decisions quickly.

A successful organisation depends upon the fact that how intelligently, flexibly and constantly its management chases, adapts and masters the changing conditions. A strong management entails to ‘keep all options open’ approach at all times. This is where contingency planning comes into the organisation.

In contingency planning, an alternate plan is identified, analysed and implemented so that in case the original plan proves insufficient, the backup is ready to be used. The factors which are beyond managers’ control are kept in mind and the alternative future scenarios are prepared carefully.

When unanticipated problems and events occur, managers may need to change their plans. It is best to anticipate the changes during the planning process as things don’t always go as expected. Management should develop alternatives to the existing plan and keep them ready for use when unexpected circumstances occur.

Planning is the primary function of management that involves formulating a future course of action for accomplishing a specific purpose.

What are the Features of Planning?

The Features of the planning function are as follows: 1. Planning is a Continuous Process 2. Planning is Intellectual Process 3. Planning is a Futuristic Approach 4. Planning is a Flexible process 5. Planning is the Primary Function of Management 6. Planning Assists in Decision Making 7. Planning is Goal-oriented Approach 8. Planning is Pervasive

What is the Process of Planning?

The process of planning involves a number of steps in chronological order which are given below: 1. Setting Organisational Objectives 2. Examining the Business Environment 3. Assessing Available Alternatives and Selecting the Most Appropriate Alternative 4. Formulating secondary plans 5. Ensuring cooperation and participation 6. Following up

What is the Importance of Planning in Management?

The importance of planning in management is explained in the following points: 1. Planning Forms Goals in Management 2. Planning Gives Directions in Management towards Achieving Organisational Goals 3. Planning Tackles Uncertainties of future 4. Planning assists in finding a better way to achieve goals 5. Planning Minimises Duplication and Wasteful Activities 6. Planning Supports and Promotes Innovative Ideas in Management 7. Planning Facilitates Decision Making 8. Planning Sets Standards for Controlling Function 9. Planning helps management to Build Coordination

Management Topics

• What is Management ?
• Who Is a Manager ?
• Marketing CIs Management an Art or Science
• Classical Management Approach
• Planning in Management
• Decision Making in Management
• Organising in Management
• What is Organisation Structure ?
• What is Departmentation ?
• What is Span of Control ?
• What is Authority ?
• What is Staffing ?
• What is Human Resource Planning ?
• What is Job Analysis ?
• What is Recruitment ?
• Modern and Others Schools of Management Thought
• What is Selection ?
• What is Coordination ?
• What is Controlling ?
• What is Leadership ?
• What is Organisational Change ?
• Motivation in Management
• Motivation Theories
• Maslow’s Hierarchy of Needs
• Herzberg Two Factor Theory
• Mcclelland’s Needs Theory of Motivation

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Is management an art or science, what is corporate culture definitions, dimensions, types, what is span of control (soc), types, factors affecting, motivation in management: importance, nature, types, level, process, techniques, organising in management: what, definition, principles, importance, factors influencing organisational structure, what is departmentation types, objectives, how does an mba help in personal and professional growth, what is coordination definition, need, importance, types, techniques, who is a manager managerial roles, skills, qualities, what is controlling types, characteristics, importance, process, techniques, what is organisation structure definition, types, factors impacting, leave a reply cancel reply.

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Business Plan

By Entrepreneur Staff

Business Plan Definition:

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask. Generally, a business plan has the following components:

Title Page and Contents A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.

Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.

Executive Summary The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front. Are you looking for a $10,000 loan to remodel and refurbish your factory? A loan of $25,000 to expand your product line or buy new equipment? How will you repay your loan, and over what term? Would you like to find a partner to whom you'd sell 25 percent of the business? What's in it for him or her? The questions that pertain to your situation should be addressed here clearly and succinctly.

The summary or statement should be no more than half a page in length and should touch on the following key elements:

• Business concept describes the business, its product, the market it serves and the business' competitive advantage.
• Financial features include financial highlights, such as sales and profits.
• Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
• Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
• Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.

Description of the Business The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Remember that bankers and investors want to know hard facts--they won't risk money on assumptions or conjecture.

When describing your business, say which sector it falls into (wholesale, retail, food service, manufacturing, hospitality and so on), and whether the business is new or established. Then say whether the business is a sole proprietorship, partnership, C or Sub chapter S corporation. Next, list the business' principals and state what they bring to the business. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.

Description of the Product or Service The business description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs.

When you describe your product or service, make sure your reader has a clear idea of what you're talking about. Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors.

Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful. If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Give hard facts, such as "new equipment will create an income stream of $10,000 per year" and briefly describe how.

Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

Market Analysis A thorough market analysis will help you define your prospects as well as help you establish pricing, distribution, and promotional strategies that will allow your company to be successful vis-à-vis your competition, both in the short and long term.

Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain. Keep in mind that no one gets 100 percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections.

You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning." Positioning helps establish your product or service's identity within the eyes of the purchaser. A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP (unique selling proposition) is.

How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas. Many methods of establishing prices are available to you, but these are among the most common.

• Cost-plus pricing is used mainly by manufacturers to assure that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing is used by companies that sell their products through a variety of sources at differing prices based on demand.
• Competitive pricing is used by companies that are entering a market where there's already an established price and it's difficult to differentiate one product from another.
• Markup pricing is used mainly by retailers and is calculated by adding your desired profit to the cost of the product.

You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user. Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services. To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales.

Competitive Analysis The purpose of the competitive analysis is to determine:

• the strengths and weaknesses of the competitors within your market.
• strategies that will provide you with a distinct advantage.
• barriers that can be developed to prevent competition from entering your market.
• any weaknesses that can be exploited in the product development cycle.

The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.

Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.

Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.

The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you'll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.

In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don't need a business plan unless you're trying to borrow money. Of course, it's true that you do need a good plan if you intend to approach a lender--whether a banker, a venture capitalist or any number of other sources--for startup capital. But a business plan is more than a pitch for financing; it's a guide to help you define and meet your business goals.

Just as you wouldn't start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before--and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

More from Business Plans

Financial projections.

Estimates of the future financial performance of a business

Financial Statement

A written report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Executive Summary

A nontechnical summary statement at the beginning of a business plan that's designed to encapsulate your reason for writing the plan

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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 is the process of developing a roadmap aimed at achieving…

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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.

9. Appendices

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

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

Business planning process

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

• 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?

Show answer

Business planning is a process of developing a roadmap aimed towards achieving a business goal. 

Show question

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?

Executive summary 

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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• Business Continuity Plan Basics
• Understanding BCPs
• Benefits of BCPs
• How to Create a BCP
• BCP & Impact Analysis
• BCP vs. Disaster Recovery Plan

Frequently Asked Questions

• Business Continuity Plan FAQs

The Bottom Line

What is a business continuity plan (bcp), and how does it work.

Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom.

Investopedia / Ryan Oakley

What Is a Business Continuity Plan (BCP)? 

A business continuity plan (BCP) is a system of prevention and recovery from potential threats to a company. The plan ensures that personnel and assets are protected and are able to function quickly in the event of a disaster.

Key Takeaways

• Business continuity plans (BCPs) are prevention and recovery systems for potential threats, such as natural disasters or cyber-attacks.
• BCP is designed to protect personnel and assets and make sure they can function quickly when disaster strikes.
• BCPs should be tested to ensure there are no weaknesses, which can be identified and corrected.

Understanding Business Continuity Plans (BCPs)

BCP involves defining any and all risks that can affect the company's operations, making it an important part of the organization's risk management strategy. Risks may include natural disasters—fire, flood, or weather-related events—and cyber-attacks . Once the risks are identified, the plan should also include:

• Determining how those risks will affect operations
• Implementing safeguards and procedures to mitigate the risks
• Testing procedures to ensure they work
• Reviewing the process to make sure that it is up to date

BCPs are an important part of any business. Threats and disruptions mean a loss of revenue and higher costs, which leads to a drop in profitability. And businesses can't rely on insurance alone because it doesn't cover all the costs and the customers who move to the competition. It is generally conceived in advance and involves input from key stakeholders and personnel.

Business impact analysis, recovery, organization, and training are all steps corporations need to follow when creating a Business Continuity Plan.

Benefits of a Business Continuity Plan

Businesses are prone to a host of disasters that vary in degree from minor to catastrophic. Business continuity planning is typically meant to help a company continue operating in the event of major disasters such as fires. BCPs are different from a disaster recovery plan, which focuses on the recovery of a company's IT system after a crisis.

Consider a finance company based in a major city. It may put a BCP in place by taking steps including backing up its computer and client files offsite. If something were to happen to the company's corporate office, its satellite offices would still have access to important information.

An important point to note is that BCP may not be as effective if a large portion of the population is affected, as in the case of a disease outbreak. Nonetheless, BCPs can improve risk management—preventing disruptions from spreading. They can also help mitigate downtime of networks or technology, saving the company money.

How to Create a Business Continuity Plan

There are several steps many companies must follow to develop a solid BCP. They include:

• Business Impact Analysis : Here, the business will identify functions and related resources that are time-sensitive. (More on this below.)
• Recovery : In this portion, the business must identify and implement steps to recover critical business functions.
• Organization : A continuity team must be created. This team will devise a plan to manage the disruption.
• Training : The continuity team must be trained and tested. Members of the team should also complete exercises that go over the plan and strategies.

Companies may also find it useful to come up with a checklist that includes key details such as emergency contact information, a list of resources the continuity team may need, where backup data and other required information are housed or stored, and other important personnel.

Along with testing the continuity team, the company should also test the BCP itself. It should be tested several times to ensure it can be applied to many different risk scenarios . This will help identify any weaknesses in the plan which can then be identified and corrected.

In order for a business continuity plan to be successful, all employees—even those who aren't on the continuity team—must be aware of the plan.

Business Continuity Impact Analysis

An important part of developing a BCP is a business continuity impact analysis. It identifies the effects of disruption of business functions and processes. It also uses the information to make decisions about recovery priorities and strategies.

FEMA provides an operational and financial impact worksheet to help run a business continuity analysis. The worksheet should be completed by business function and process managers who are well acquainted with the business. These worksheets will summarize the following:

• The impacts—both financial and operational—that stem from the loss of individual business functions and process
• Identifying when the loss of a function or process would result in the identified business impacts

Completing the analysis can help companies identify and prioritize the processes that have the most impact on the business's financial and operational functions. The point at which they must be recovered is generally known as the “recovery time objective.”

Business Continuity Plan vs. Disaster Recovery Plan

BCPs and disaster recovery plans are similar in nature, the latter focuses on technology and information technology (IT) infrastructure. BCPs are more encompassing—focusing on the entire organization, such as customer service and supply chain. 

BCPs focus on reducing overall costs or losses, while disaster recovery plans look only at technology downtimes and related costs. Disaster recovery plans tend to involve only IT personnel—which create and manage the policy. However, BCPs tend to have more personnel trained on the potential processes. 

Why Is Business Continuity Plan (BCP) Important?

Businesses are prone to a host of disasters that vary in degree from minor to catastrophic and business continuity plans (BCPs) are an important part of any business. BCP is typically meant to help a company continue operating in the event of threats and disruptions. This could result in a loss of revenue and higher costs, which leads to a drop in profitability. And businesses can't rely on insurance alone because it doesn't cover all the costs and the customers who move to the competition.

What Should a Business Continuity Plan (BCP) Include?

Business continuity plans involve identifying any and all risks that can affect the company's operations. The plan should also determine how those risks will affect operations and implement safeguards and procedures to mitigate the risks. There should also be testing procedures to ensure these safeguards and procedures work. Finally, there should be a review process to make sure that the plan is up to date.

What Is Business Continuity Impact Analysis?

An important part of developing a BCP is a business continuity impact analysis which identifies the effects of disruption of business functions and processes. It also uses the information to make decisions about recovery priorities and strategies.

FEMA provides an operational and financial impact worksheet to help run a business continuity analysis.

These worksheets summarize the impacts—both financial and operational—that stem from the loss of individual business functions and processes. They also identify when the loss of a function or process would result in the identified business impacts.

Business continuity plans (BCPs) are created to help speed up the recovery of an organization filling a threat or disaster. The plan puts in place mechanisms and functions to allow personnel and assets to minimize company downtime. BCPs cover all organizational risks should a disaster happen, such as flood or fire.  

Federal Emergency Management Agency. " Business Process Analysis and Business Impact Analysis User Guide ," Pages 15 - 17. Accessed Sept. 5, 2021.

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What Is Integrated Business Planning and Why Is It Important?

Think of modern integrated business planning, or IBP, as a mashup of supply chain optimization, financial planning and analysis (FP&A) and operational best practices, powered by a companywide culture that’s all about delivering the speed, savings and responsiveness today’s consumers demand while managing risk.

Note that IBP as a fuzzy, buzzword-laden process methodology has been around for years. It’s usually implemented by expensive consultants in sprawling, global corporations that know they need to unify siloed sales, supply, financial and operational resources — before more nimble competitors relegate them to the former Fortune 500 list.

We’re here to argue that IBP deserves a second look for any company that wants to maximize profits and minimize the risks associated with growth. No six-figure consultant required.

What Is Integrated Business Planning?

On paper, IBP is a process for aligning a company’s business goals with its finance, supply chain, product development, marketing and other operational functions. Think parts suppliers that work with automakers and need to constantly retool to accommodate design changes, or food producers operating on razor-thin margins that must manage both uncertain supply chains and fickle customer tastes.

Lag, and a competitor is standing by to take that business. Move quickly but in a disjointed manner and you may keep customers, but at the expense of higher cost of goods sold (COGS) and lower profitability.

For example, consider PickerBots, a fictional maker of custom machinery for manufacturing and warehouse operations. When the company launched in 2017, it found a niche in restaurant supply, but when that business slowed significantly in 2020 the founders decided to retool. Rather than simply changing up its marketing, the firm set out to revamp its business strategy. A top-down scenario planning exercise led to realigning its R&D, demand forecasting, profitability and revenue analysis, supply chain planning and marketing and sales strategy.

The company culture was already strong on innovative thinking, but the founders realized that the link between strategic planning and day-to-day operations could use improvement. Enter a new COO with the chops to align operations with product demand planning and sales and marketing while weighing in on financial targets and budgets.

Key Takeaways

• In a company that embraces IBP, there’s a direct line from purchasing, production and inventory to sales and marketing to financial targets and budgets.
• A key IBP benefit is that materials are bought at the right price, at the right time and in just the right quantity to fulfill market demand.
• Successful IBP delivers closer collaboration and more trust among departments, leading to improved decision-making.
• IBP may require significant cultural change and cannot be successful without unwavering commitment from the executive team.

Integrated Business Planning Explained

Many organizations mistake IBP for a supply-chain-centric exercise. While linking supply chain planning with other departments, from sales and operations through finance, is important, that’s just one element.

IBP aligns business g oals and financial t argets with decisions and execution across the entire business.

There is overlap with financial planning and analysis (FP&A). Because an IBP initiative gathers data from across the enterprise, companies get better at predictive analysis. Now, when purchasing forecasts a parts shortage, supply and operations can adjust before customers are affected.

It’s also not a one-and-done exercise. PickerBots’ new COO advises looking a minimum of 36 months out. Leaders will need to keep their eyes on that long-range plan while continually reviewing, revising and communicating financial and operating results. What supply chain gaps have opened up, and how can we close them? Do we need to update our scenario planning? Are we tracking the right financial KPIs?

A crucial element of IBP is that it integrates financials with operations. Here’s a structure that PickerBots plans to follow.

Why Is Integrated Business Planning Important?

Companies that undertake IBP realize a number of practical benefits, including reduced holding costs, more responsive customer service and demand fulfillment, shorter time to market for new products and an improved correlation between demand planning and fulfillment.

After PickerBot’s scenario planning and strategy session, the company decided to jump into the emerging collaborative robot, or cobot, market. A collaborative robot is designed to safely interact with human workers. PickerBot’s leaders believe demand will increase for “pick and place” cobots with fine motor skills for use on manufacturing lines as well as in agricultural settings.

Now that the company has its strategic direction, the COO wants to focus on three higher-level concepts before delving into more practical areas, like financial planning and analysis and supply chain optimization. That’s because without goal-setting, PickerBots won’t be able to define success.

Alignment and accountability 

All executives must agree on three things: What are our corporate goals? What does success look like for each? How will I and my team contribute and be accountable?

The company’s goals are grouped into four areas: industry-focused, operations and supply chain, financial and marketing and sales. The management team will review all goals to make sure they align with strategy and are both actionable and achievable.

Industry-focused goal: Offer the most innovative cobots on the market

What success looks like: Develop a product that can match or exceed a human worker in its ability to pick fragile crops without damage.

Who will execute: The R&D team

Financial goal: Diversify revenue streams

What success looks like: Minimize dependence on one market/industry. Add a services arm to generate recurring revenue from maintenance contracts, powered by sensors built in to all new products.

Who will execute: Cross-functional led by CEO and finance

Other goals might be “control costs at each step and deliver cobots to customers on time and to specifications” with an expectation to lower COGS by 10% and raise the company’s Net Promoter Score by 25% within one year. Or for sales, “find 10 new customers for the company’s agricultural cobots and bundle maintenance contracts with each sale.” That ties back to revenue diversification.

An important point: Every manager is accountable for every goal, not just those that lie within their purviews.

Informed decisions and actions 

Planning across PickerBots’ supply chain was disjointed, with engineers purchasing materials direct and little central planning or cost control. As part of the IBP process, the company will adopt sales and operations planning (S&OP) principles to improve its supply chain and logistics.

Actionable goals here include building visibility into how each department is working and tying the impact of decisions to financial goals. For example, by having R&D build in sensors that can automatically collect and transmit data on a cobot’s operational status, PickerBots can proactively perform preventative maintenance so the devices are almost never down — an important selling point and a way to contribute to maintenance income.

Organizationwide, divisions need to focus less on their own needs and view actions through the lens of all goals. That means the company needs to collect a lot of timely data and use it to issue reports so managers can make better decisions, more quickly. That may require an investment in ERP and other software.

Transparency/visibility 

All department heads will take part in a monthly business review, where the group will assess progress in achieving the company’s objectives. The strategic plan is also available to all staff members, and quarterly all-hands meetings will be held to gather ideas and insights and walk through KPIs.

Four success metrics for the IBP process include:

1. Getting all stakeholders to buy in to corporate goals so that everyone agrees and understands what the business wants to achieve and how it will get there. There are clear responsibilities for each function in the pursuit of goals.

2. Basing business decisions on data. The integration of finance into product, demand and supply functions is key here, as are selecting the right KPIs.

3. Tying decision-making to outcomes and improving accountability. Because every department is responsible for providing accurate numbers and projections, there’s less risk that the CFO and finance team are left holding the bag if revenues fall short.

4. Shifting the culture to embrace cross-functional collaboration. An IBP process encourages openness and trust, and as a result more deeply engages and empowers employees. As an action item, each R&D and manufacturing team member will spend a week annually accompanying sales reps on customer calls.

What Is the Difference Between S&OP and IBP?

The term “IBP” was coined by management consultancy Oliver Wight to describe the next iteration of the sales and operations planning (S&OP) process Wight developed in the early 1980s.

The big difference between IBP and S&OP is that the latter has become the domain of supply chain and logistics specialists, particularly those involved in supply-and-demand balancing and planning. S&OP is execution-focused and involves a traditional budgeting process.

In contrast, IBP takes a more cross-functional and holistic approach to weaving business goals through every function. As a result, in theory, supply chain management is proactive and optimized.

IBP includes S&OP processes but because it involves cultural change, without executive buy-in, IBP will not be successful.

Some major differences between S&OP and IBP are:

6 Steps in the Integrated Business Planning Process

Now that its goals are set, PickerBots can take the next steps in its IBP journey.

1. Determine what is holding the company back. Is it a lack or growth or profitability? Is the product portfolio too complex? Has the business lost competitiveness in its space? For our manufacturing firm, the main problem was overfocus on one niche market.

2. Engage and educate employees. Once leadership buys in to goals, that enthusiasm must trickle down through the ranks. Unless everyone is committed to integrated business planning, success will be elusive. The COO recognizes that a formal employee engagement program will keep workers invested in the success of the business and actively working to meet strategic goals.

3. Set up a tiger team. IBP success comes from tight coordination, constant communication and accountability for KPIs. It’s a cultural shift that will take time to propagate throughout the business. To jumpstart things, PickerBots identified engaged employees within each functional area and assigned them to a daily 20-minute standup call. Now, say a shipment of RFID readers needed by manufacturing will be two weeks late. The purchasing team member shares that information promptly so that sales can manage customer expectations and finance can account for delayed revenue. If the problem recurs, the company can seek out new suppliers. No more surprises.

4. Establish a project/product prioritization process. IBP takes discipline. Only projects that forward the company’s strategic goals get resources. Same for products. That might mean sunsetting a line that’s still selling but lacks growth potential. All managers who require resources or have a product or service launch idea fill out a cost-benefit analysis template that is tailored to reveal whether expected benefits and costs align with goals. Leadership prioritizes using this process. No more sacred cows.

5. Expand the finance team’s influence. Finance needs to sit in on product planning, supply chain optimization and sales strategy meetings. Specifically, choose a finance team member well-versed in FP&A functions. FP&A professionals inform major decisions made by the executive team and collect and analyze financial data from across the organization to create reports that reveal whether goals are being met — and if not, why not? How do we fix the problem? Like many smaller firms, PickerBots doesn’t have a dedicated FP&A staffer, so the head of finance assigns an accounting team member who knows the business and has an aptitude for data collection and number crunching.

6. Adopt technology and tools to support IBP. If the forecasting process is seen as a quarterly or annual exercise imposed by finance and yielding little benefit to departments, IBP can’t succeed. Companies with static, point-in-time budgets need to adopt rolling forecasts to make sure the business stays on track. And, finance teams need to be able to easily access the data they need from each operational area. Both rolling forecasts and better use of data require technology and a commitment to transparency. You can’t manage what you can’t measure.

Traditional vs. Rolling Forecasts

5 tips to succeed at integrated business planning.

Some ways the COO plans to set PickerBots up for success include:

1. Sell IBP as a way to bring order from chaos. For example, large companies, especially those that have engaged in a number of mergers and acquisitions, may have thousands of SKUs and product codes. One big manufacturer Oliver Wight worked with used IBP to whittle 120,000 item numbers down to about 10,000 and reduce inventories by 50% while improving on-time, in-full delivery by up to 20%. For a smaller company, IBP can prevent ever getting in a situation where it needs to slash 90% of SKUs.

2. Adopt a continuous improvement mindset. All parts of any production or service system, particularly people, are interconnected, inform one another and are mutually dependent on generating successful outcomes. This practice’s origin comes from Kaizen, a Japanese term meaning “change for the better.” Originating in Japan, the business philosophy looks to continuously improve operations and involve all employees, from assembly line workers to the CEO. It’s a way to reinforce IBP.

3. Get buy-in from the CIO. PickerBots’ CIO came up through the ranks of manufacturing IT and is familiar with the concept of Total Quality Management (TQM), which has overlap with IBP. That went a long way in communicating the benefits of IBP and freeing up budget for technologies that can make IBP work, like ERP, enterprise performance management (EPM), supply chain management and real-time-capable accounting and finance software — especially important to realize the “one set of numbers” value proposition.

4. Apply risk management principles. Disasters large and small happen. While the zen of IBP skews toward positive and upbeat, make sure department heads are doing scenario planning and what-if analyses to model operational risk — like overdependence on one market. Consider assigning your tiger team a secondary function as a crisis management strike force.

5. Don’t forget HR. Labor is likely your company’s biggest operating expense, so ensure that it’s working for your IBP effort, not against it. A human resources professional can identify traits in applicants — like team players who are data driven and comfortable with transparency — that predict whether they will be contributors to IBP success.

Benefits of Integrated Business Planning

Research shows that the main benefit of implementing IBP is increased revenue, followed by forecast accuracy and improved Perfect Order Delivery rates.

Three additional key benefits:

Real-time insights: Once companies have instituted rolling forecasts, for example, finance can more quickly and accurately answer questions on spending and cash flow. Expect more accurate KPIs across the board.

Ownership: The flip side of accountability is that in a company fully embracing IBP, all employees assume responsibility for meeting all goals. So you’d better make sure that authority to make decisions is decentralized and tied to responsibility for outcomes, because there are few bigger morale killers than accountability without the power to effect success. Companies can further nurture a culture of ownership by tying rewards to meeting or exceeding goals.

Improved customer satisfaction: While more on-time, in-full deliveries make customers happy, that’s not the only way IBP improves Net Promoter Scores. Better planning yields better insights into what customers want, and a strong company culture often leads to improved customer empathy and its associated benefits.

Integrated Business Planning Adoption Challenges

Where a business starts with IBP depends on its maturity. Companies with dog-eat-dog cultures and highly siloed processes have a lot of work to do. These tend to be firms with traditional top-down management structures, static annual budgeting with little ability to generate forward-looking projections and dated business plans that are misaligned with current customer needs.

While all are thorny structural challenges, a leadership team that’s averse to placing trust and decision-making authority at lower levels of the organization is in even worse shape. Companies with autocratic, command-and-control styles must be willing to decentralize authority if they hope to realize IPB’s benefits.

Even businesses with mature, integrated processes and egalitarian cultures often get tripped up by “top down” versus “bottom up” KPI reporting and budgeting. IBP requires businesses to focus less on finance developing a top-line budget and then handing departmental budgets down from on high. Rather, they need to become comfortable with a bottom-up process, where departments start with a plan of what they want to achieve, calculate what it will cost and then feed a number up to the finance team, which uses that input to calculate the total budget.

Companies not already using at least a somewhat flexible budgeting process are likely to find this shift difficult. One way to jump-start the transformation might be a modern form of zero-based budgeting.

Steps of Zero-Based Budgeting for 2021

• Create a strategic vision for ZBB: Identify cost targets, relevant KPIs and goals.
• Evaluate business units to select ZBB candidates (also referred to as “decision units,” or any organ of the business that operates independently with its own budget).
• Start selected budgets from scratch (i.e., from zero).
• Each decision unit provides “decision packages,” which break down each activity in terms of its objective, funding needs, justification in the context of company goals, technical viability and alternative courses of action.
• Evaluate each proposed item to determine its value-add to the company and whether the entire cost is justified. What does the expenditure bring back to the company?
• Prioritize costs based on company goals. Reduce or cut expenses in areas that no longer produce significant value.
• Allocate funds among areas that are productive and aligned with the business’s growth drivers.

Elements of Integrated Business Planning

Integrated business planning takes place at a regular cadence; every month is most common, so we’ll use that in our example.

These steps are standard for IBP consultants, adaptable to most industries and bake in the PickerBots COO’s virtuous cycle of market research and strategic planning, R&D and manufacturing, demand forecasting and predictive analysis, profitability analysis, supply chain optimization and marketing and sales strategy.

1. Product management review. This includes all elements of product portfolio management. A cross-functional team meets monthly to review the overall status of all of product-related projects: Are they on track? Have we identified new risks and opportunities? Are the most high-value products or services prioritized? The goal is aligning the product portfolio with business goals and making sure needed raw materials and manufacturing floor capacity are lined up. Product managers revise as needed and publish an updated master plan, along with the resources it’ll take to deliver any changes.

2. Demand planning picks it up. This is a cross-functional process that helps businesses meet customer demand for products while minimizing excess inventory and avoiding supply chain disruptions. Demand planning can increase profitability and customer satisfaction and lead to efficiency gains. This team brings together members of sales, marketing and finance to determine whether they’re targeting the right markets, the right way. They work up an optimized demand plan. Relevant KPIs include sales forecast accuracy, inventory turns, fill rates and order fulfillment lead times.

3. Then, the ball goes to the supply planning team. These supply chain experts work out the optimal way to meet projected demand in a cost-effective way. The key is to have visibility into complex supply chains; a formal supply chain visibility (SCV) project helps spot and fix weaknesses, such as inventory shortfalls or order fulfillment issues, before they become major problems. Lower cost of goods sold (COGS) is the North star.

4. The integrated reconciliation team pulls together the initial product, demand and supply plans and consolidates them into one holistic business plan based on a 24- or 36-month projection; for iterative updates, teams highlight material changes. Decisions that could not be made by individual teams are prepared for executive review.

5. The executive team resolves conflicts and rolls the updated plan out to the entire company.

Integrated Business Planning Components

The components of integrated business planning comprise three buckets: Plan, execute and monitor and adjust.

Specific actions falling into each bucket vary depending on the consultancy or technology supplier. Some are more aligned with supply chain planning, while others center on S&OP or financial planning with plug-ins to other functional areas. Others are very industry-specific.

Let’s look at Oracle’s IBPX (Integrated Business Planning and Execution) for Manufacturing solution as an example. Key components include:

• Top-down and bottom-up, driver-based planning and forecasting
• Risk modeling for M&A and strategic initiatives
• Full financial statement structure for strategic and operational planning
• Predictive and prescriptive analytics and planning
• A preseeded S&OP process
• Near-real-time demand and supply balancing
• Real-time backlog management
• Automation of predictions and correction actions based on actuals
• AI-enabled operational planning, such as for sales territories and quotas
• IoT and sensor data flows integrated with automated decisions

Items like backlog management and enhanced support for IoT and sensor data are important to manufacturers like PickerBots. A retailer might be more interested in advanced inventory management. What’s important is that any solution, whether purchased as a suite or pulled together by an integrator or in-house team, supports the ability to do long- and medium-range and short-term planning based on a single, up-to-date data set that’s accessible to all authorized stakeholders.

Also look for the ability to easily model “what-if” scenarios, robust budgeting and costing and a roadmap to advanced technologies like AI and predictive analytics.

Integrated Business Planning Examples

We mentioned the Oliver Wight customer that whittled 120,000 SKUs down to about 10,000. That firm, Uponor Group, looked to IBP after a string of acquisitions left it with swelling inventories, an extremely complex portfolio and a lack of communication between siloed functions and far-flung locations. The Finnish company sells products for drinking water delivery as well as radiant heating and cooling equipment and has 3,900 employees in 30 countries. Uponor had a hard time getting a singular view of financial information across its subsidiaries, and each unit had its own practices for inventory management. Small events, such as holidays, would drive some sites to build up “just in case” inventory, and double-stocking in warehouses was common. Subsidiaries in different countries had different SKUs for the same items, and R&D was localized, with no collaboration across the company.

Upinor focused first on its supply chain and implemented S&OP processes, then advanced to IBP the following year. The results have been an increase in net sales of $1.1 billion euros, a 30% improvement in on-time in-full deliveries, a 50% reduction in inventories and increased visibility.

U.S.-based technology provider Juniper Networks also undertook an IBP project focused on implementing a digital supply chain with IBP, where the business planning process would extend S&OP throughout the supply chain, product and customer portfolios, customer demand and strategic planning.

Since undertaking the project, Juniper’s lead-time attainment is up 55%. and its inventory costs are down by 15%, allowing it to realize a positive ROI on the IBC project.

History of Integrated Business Planning

Oliver Wight developed S&OP in the 1980s as a methodology for a client that wanted to balance supply-and-demand volume. In the years since, the process evolved to integrate financials, inventory and new-product introductions.

The consultancy renamed S&OP as integrated business planning in the late 1990s to reflect the process of integrating all functions of the business behind one optimized plan. Since then, a newer term, “enterprise integrated business planning,” has emerged. EIBP includes scenario planning and extended supply chain collaboration and discusses how large companies will adopt new technologies, such as AI, big data and advanced analytics.

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Applications of Integrated Business Planning

IBP makes planning and operations much more transparent, so it’s ideal for companies moving to “just in time” manufacturing. It’s also predictive, once a company builds up some data. That can help with customer satisfaction.

PickerBots, as an example, found that it typically sees constrained supply chain capacity for motherboards in Q3. With that insight, sales and marketing can work to encourage customers to take delivery of systems in Q2 or Q4, manufacturing can prebuild products and supply chain leaders can work on alternate sources for parts that pose challenges.

Looking ahead to the future of IBP, we expect it to help companies:

• Work on ever-longer-range strategy planning, modeling and M&A activities with a higher degree of confidence.
• Detect and notify stakeholders of unanticipated events before they impact the business by using advanced technologies, including real-time sensor information and machine learning (ML) pattern recognition.

As companies build comfort with automation, advanced IBP systems can be set to take action based on analysis without human intervention. Consider a chain of bakeries; a system plugged into a long-range weather forecast system might detect a tropical storm that could raise the price of vanilla and automatically order extra.

Cloud-based technology such as ERP underpins all these advances. For example, PickerBots always set its sales goals monthly. But often these plans were delayed to let the executive team review and approve any changes, meaning operations was caught unawares. A tool like NetSuite Planning and Budgeting automates planning processes and centralizes company financial and operational data, so finance teams can disseminate updates quickly.

The next frontier? Expending IBP to business partners and suppliers, even customers. But first, companies need to get their own cultural and technology houses in order.

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U.S. braces for costly government shutdown

Federal workers and military service members won’t be paid, while federal programs — from some food safety inspections to child-care funds — will come to an abrupt halt.

Millions of federal employees and active military service members will stop receiving paychecks — but many will be forced to report to work anyway.

Some national parks may close, museums could shutter and airports nationwide might see new disruptions and delays.

And the most pivotal federal aid programs — including those assisting the victims of the deadly wildfires in Maui — might not be able to provide urgently needed support.

On Oct. 1, the U.S. government is set to shut down , unleashing real and wide-ranging financial hardship on American families, workers and businesses. The lapse in funding would mark a fundamental breakdown in an ever-divided, intransigent Washington, where Republicans’ demands this year have prevented Congress — time and again — from easily fulfilling its most basic fiscal responsibilities.

In an ominous sign, the Biden administration on Friday took the first steps to prepare government agencies for a potential stoppage, according to a senior administration official who spoke on the condition of anonymity to describe the private discussions. The White House’s Office of Management and Budget told federal leaders to update their intricate blueprints for how they would operate if funds run dry, while it readied a draft communication that they could use to notify employees about the situation.

How a government shutdown could affect you

At the heart of the stalemate are renewed Republican calls for deep federal spending cuts, more than three months after House Speaker Kevin McCarthy (R-Calif.) finalized a deal with President Biden that was supposed to prevent this very brinkmanship. Far-right lawmakers have blocked the House in recent days from adopting a short-term measure that would sustain federal spending at its existing levels and buy more time for the two parties to work out a longer-term arrangement.

If Congress does not resolve the impasse before midnight on Friday, federal appropriations will expire, bringing many agencies to a halt and forcing the sprawling U.S. government to operate as a mere shell of itself.

As usual, mail deliveries would continue and seniors would still receive their Social Security checks, because they are not funded through annual appropriations. But older Americans might not be able to obtain new Medicare cards or address some other issues with their benefits until federal funding resumes.

Some federal inspections that ensure food safety and prevent the release of hazardous chemicals in drinking water would be halted, the Biden administration has warned. Federal research toward cancer cures and other innovative therapies would cease. Some passport offices would close if they are located in affected government buildings, potentially snarling some Americans’ plans for international travel.

And with each passing day, Washington would further deplete federal safety-net programs that carry over their unused money from past years. Eventually, the government might not be able to provide some poor families with child care, nutrition assistance, housing vouchers or college financial aid. The longer a shutdown persists, the greater the blow it could ultimately deliver to an economy that has teetered for more than a year on the precipice of recession.

“The solution is very, very simple. Extreme House Republicans need to stop playing political games with people’s lives,” White House press secretary Karine Jean-Pierre told reporters Thursday. “There’s so much at stake here.”

Poor families could see cuts to food aid as Congress battles over budget

For the moment, Congress continues to barrel toward another fiscal crisis , in a year that has already seen the U.S. government almost default on its debt. Far-right Republicans have made clear that they are willing to use pivotal deadlines — and the threat of economic catastrophe — to extract policy concessions from Biden and, at times, pressure leaders of their own party. McCarthy has largely acquiesced to their demands, even directing committees this month to open an impeachment inquiry into Biden to appease restive conservatives.

Last week, House lawmakers departed the Capitol with seemingly no resolution in sight, raising the odds that the country is now less than a week away from what would be the 21st shutdown since 1977 , when the United States shifted the start of its fiscal year to Oct. 1. The heaviest initial blow would fall on about 2.2 million federal employees who would not receive pay for as long as appropriations lapse, said Jacqueline Simon, the policy director of the American Federation of Government Employees, the largest union of federal workers.

“Most Americans cannot go without a paycheck on payday,” she said. “The vast majority of our members cannot go even one pay period, let alone two, three, four pay periods, without a paycheck.”

The immediate loss of income would arrive as prices remain elevated from high inflation over the past year, and just before the U.S. government is about to resume requiring borrowers to repay their student loans. Many federal workers would not have to report to their jobs, but the government is likely to deem hundreds of thousands of its employees as “excepted” from the shutdown because they deal with national security or public safety.

Even in a shutdown, the nation’s approximately 1.3 million active-duty troops would also helm their stations without pay. Once federal funding resumes, though, the government is required by law to repay federal employees and military personnel. Federal contractors, however, would not be compensated for missed time.

While the Pentagon retains broad latitude to continue programs in the name of national security, top defense officials in recent days have signaled that a shutdown next month could prove unusually disruptive — even inhibiting their ability to provide some foreign military aid. That includes the supply of select materiel to Ukraine as it continues to fend off Russia, which some House Republicans oppose.

Appearing on Sept. 19 on Capitol Hill, Mira Resnick, the deputy assistant secretary of state for regional security, stressed that previous shutdowns have left her agency “unable to process new foreign military sales for any partner,” except in emergencies, before imploring lawmakers: “This is something we would like to avoid.”

Biden seeks $16 billion in disaster aid as Idalia, wildfires deplete federal funds

The lapse in funding could prove just as debilitating for Americans outside of government, especially those who are still recovering from recent wildfires, hurricanes and other natural disasters.

The primary federal fund for disaster recovery has fallen to about $2.4 billion, a level that the Federal Emergency Management Agency has described as unsustainable amid hurricane season. FEMA spent more than that — about $2.6 billion — just in the first 30 days after Hurricane Ian struck Florida last year.

Last month, FEMA took the rare step to begin rationing its money, pausing about $1.5 billion in longer-term recovery projects to ensure it has enough cash on hand in the event of a major, deadly crisis, said Deanne Criswell, the agency’s administrator . Asked what might happen if those funds approach zero without new appropriations, Criswell told lawmakers at a hearing last week that the consequences could be dire.

“Given our current state,” she said, the fund balance “would be insufficient to cover all of our ongoing lifesaving operations.”

What to do if a federal government shutdown stops your paycheck

The most recent interruption in federal funding occurred under President Donald Trump , a 34-day lapse in appropriations beginning in the waning hours of 2018 that marked the longest shutdown in U.S. history. Trump held up government funding into January 2019 in an attempt to force Democrats to fund construction of a wall along the U.S.-Mexican border.

Ultimately, Trump did not secure the money as part of a deal to reopen the government in January, at which point the shutdown had already incurred great economic cost. That month, a federal budget watchdog estimated that the political stalemate had delayed about $18 billion in government spending, while reducing gross domestic product by an estimated $8 billion that quarter and interrupting a vast swath of American life.

Nationally, air passengers at the time saw significant delays: Unpaid for a month, some inspectors at the Transportation Security Administration — the federal agents who check bags and protect flights — stopped coming to work “due to the financial toll of the shutdown,” a trio of top airline union groups said then . Four years later, the National Air Traffic Controllers Association renewed its plea for congressional action, warning last week that the last shutdown imperiled “safety activities that proactively reduce risk,” before adding: “We cannot let history repeat itself.”

The exact economic effects of a shutdown may not be immediately evident, because some of the federal officials who produce and release data about inflation and unemployment might stop work as well. But a lapse in funding beyond a few weeks — on top of rising interest rates and other economic turbulence — could result in a “meaningful hit to growth,” predicted Mark Zandi, the chief economist at Moody’s Analytics.

“None of this is any good for the economy,” he said.

Two years after lawmakers approved a bipartisan bill to rejuvenate the economy and improve the country’s infrastructure, a failure to fund the government would leave it temporarily unable to approve some projects to improve the nation’s roads, bridges, pipes, ports and internet connections.

“It hamstrings federal agencies, and there are a lot of them doing infrastructure work,” said Maria Lehman, president of the American Society of Civil Engineers. “There’s uncertainty on ongoing projects, [and] new projects can’t get underway.”

The United States would slow down its efforts to inspect workplaces for safety hazards, according to the White House, while the government would not be able to process new applications for loans to cash-starved small businesses. And federal agencies would face escalating challenges in providing critical economic support to Americans under financial duress.

Roughly 10,000 children would lose access to child care starting in October as a result of disruptions to Head Start, a program that provides grants to care organizations, according to the White House, which released its own estimate of shutdown implications Wednesday. Without those grants, some of these child-care centers probably would shutter, leaving parents struggling to balance family and work obligations.

The loss of funding would worsen what is already expected to be a child-care crisis this fall. Even if Congress does fund the government in time, lawmakers are not expected to renew pandemic-era funding that boosted child-care programs. That could result in the closure of 70,000 child-care centers, totaling 1 in 3 nationally, starting next month, experts have said.

Child care is about to get more expensive, as federal funds dry up

At the start of any shutdown, the U.S. government could continue to pay out food stamps and other nutrition aid, provide housing vouchers to low-income families, and process financial aid for the neediest college students. But federal agencies in recent days have signaled that they may have to dial back this support after October if the shutdown spans weeks or longer.

One of the programs — a food-and-vegetable benefit for women, infants and children known as WIC — may only be able to sustain its operations for a few days if federal appropriations lapse, according to the Agriculture Department. That could put roughly 7 million pregnant and postpartum women, infants and children up to age 5 at risk of benefit cuts that leave them hungry, the agency said Friday.

Some states, which manage WIC benefits, may have leftover funds that allow them to continue providing nutritional support even into a shutdown. But the relief is likely to prove short-lived, since the WIC program already faces a s ignificant budget shortfall, a gap that prompted the Biden administration this month to ask Congress for $1.4 billion in emergency aid.

Sharon Parrott, the president of the left-leaning Center on Budget and Policy Priorities, pointed to the uncertainty as she acknowledged that millions of families could be at risk if congressional inaction causes a lengthy government shutdown.

“The longer a shutdown lasts,” she said, “the more problems would emerge.”

What to know about a possible government shutdown

The latest: On Wednesday, the odds of a government shutdown grew as House GOP leaders rejected the Senate’s spending bill, and House Republicans may imperil Ukraine funding . Here’s what to know about a possible government shutdown and see where federal employees live in the U.S.

What’s impacted by a shutdown? The FAA is facing a double government shutdown . Here’s how a shutdown would impact Medicare and Medicaid benefits as well as WIC and SNAP services . Here’s a federal worker’s shutdown survival guide and what to do if the shutdown stops your paycheck .

History of shutdowns: Which president had the most shutdowns? Here’s a look at the shortest and longest government shutdowns in U.S. history.

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