Business Planning – Importance, Types and Key Elements

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LAFFAZ Media

Business planning is essential for entrepreneurs because it allows you to layout a roadmap on how you can conduct your operations and come up with a strategy to set up a profitable business. With a business plan, you can outline your professional goals, your plans to achieve them as well as the resources you may need to run your business. It is important to create time to draft a business plan and continuously update it so that you prepare for the risks and challenges that you can come across. With a business plan, it is easy to go from the idea stage to the action stage.

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Importance of a Business Plan

A business plan will help you come up with realistic action points and set practical objectives for your idea. To add, a business plan is useful when you want to bring in other people such as investors, or any other person you may want on your team. A blueprint on how you plan to run your operations will boost your potential investors’ confidence because it reveals how seriously you take your idea. As daunting and time-consuming as it may be, developing a business plan is a worthwhile investment. Writing a business plan will force you to come up with solutions to some critical issues that may come up in the future. You can ask yourself difficult questions, and think about ways to address them. As such, you can avoid making costly mistakes. The importance of a business plan cannot be overstated so you should consider taking the time you need to develop one.

Types of Business Plans

You must understand that there are different types of business plans and these include operational plans, strategic plans, tactical and contingency plans among others. These business plans are drafted by both new and existing businesses.

A. Strategic Business Plans

One of the first plans that any business should create is a strategic business plan. A strategic business plan describes why a company exists or why a certain product or service should be on the market. It merely gives the big picture of an organisation. Drafted at the executive or management level, a strategic plan provides a company’s vision statement, mission and mid to long term objectives. These plans guide the organisation. A strategic plan can be prescriptive or descriptive, where a SWOT analysis determines the prescriptive plan whilst general guidelines or policies are used to create descriptive strategic plans.

Strategic plans act as a guide and without such guidance, there is no way of telling whether a business is on track or not. These plans can cover periods ranging from 3 to 5 years plus they are revised regularly to assess the effect of changes in the industry and legal and regulatory conditions. Some of the benefits of strategic planning are allowing organisations to become aware of their opportunities and threats and find ways to either capitalise on them or address them in addition to creating standards and holding people accountable.

B. Operational Business Plan

Another type of business plan a new or existing business can create is an Operational plan. In it, business owners can lay out how they plan to create a product or service and provide it to their customers. An operational plan lays out the day to day activities of an organisation. These plans can be seen as ongoing plans. Some of the content which is included in operational plans include, standard operating procedures, policies and guidelines for approaching problems as well as certain rules and regulations for the organisation.

An operational plan outlines the activities a company is supposed to undertake in order to achieve its goals and it normally covers 12 months or so. An operational plan is developed from the business strategic plan. You can find specific targets, roles and responsibilities that are assigned to individuals. There are also departmental budgets, and objectives in order to propel the success of a strategic plan.

C. Tactical Business Plans

Another type of business plan is a tactical plan. Tactical plans focus on what will happen in order for an organisation to achieve its goals. This plan is mainly focused on short-term goals which are set to be attained within a short period of time. The scope is usually less than a year plus, a tactical plan breaks down the operational and strategic plan into questions such as what needs to happen and the action points that need to be taken in order for the company’s goals to be attained. Tactical plans also differ from operational plans in that these plans break down and set timelines on what an organisation needs to do in order to achieve a strategic goal. Tactical plans differ from operational plans in that they are drafted in order to address immediate concerns or issues.

D. Contingency Plans

Another type of business plan that all types of organisations should create is a contingency plan. Contingency plans are created in order to address certain risks that may arise when running a business. This plan is regarded as a special type of business plan that can also be referred to as a “Plan B”. It is important to note that every type of business faces unique risks. As such, an entrepreneur should conduct a risk assessment in order to identify the risks associated with the organisation. This should be done by assessing a company’s operations, weaknesses and external threats. After assessing these a list of possible risks can be drafted together with a plan on how to mitigate them. A contingency plan is crucial because it can help you avoid losses or prevent your business from going under in the case of an unlikely event.

There are other types of business plans such as financial plans but these are usually included in the budgets for each of the above plans discussed. All the types of business plans highlighted apply to all kinds of businesses whether you are setting up a start-up or running an existing business plus their importance cannot be overstated.

Asiya
Asiya

Staff writer at LAFFAZ, Asiya is a keen collector of lesser-known yet significant facts and stories from all across the world and loves presenting them to the masses through her writings.

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