planning practices in business plan

The Business Planning Process: 6 Steps To Creating a New Plan

In this article, we will define and explain the basic business planning process to help your business move in the right direction.

What is Business Planning?

Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.

The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.

The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.

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The Better Business Planning Process

The business plan process includes 6 steps as follows:

• Do Your Research
• Calculate Your Financial Forecast
• Draft Your Plan
• Revise & Proofread
• Nail the Business Plan Presentation

We’ve provided more detail for each of these key business plan steps below.

1. Do Your Research

Conduct detailed research into the industry, target market, existing customer base,  competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:

• What are your business goals?
• What is the current state of your business?
• What are the current industry trends?
• What is your competition doing?

There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.

You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.

2. Strategize

Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.

This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.

3. Calculate Your Financial Forecast

All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.

Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.

A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.

This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.

4. Draft Your Plan

With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.

If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.

5. Revise & Proofread

Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.

Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.

6. Nail the Business Plan Presentation

The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.

Business Planning Process Conclusion

Every entrepreneur dreams of the day their business becomes wildly successful.

But what does that really mean? How do you know whether your idea is worth pursuing?

And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way. ​

Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.

Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.

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The top 10 strategic planning best practices.

In order to make sure your strategic planning process is a success, it’s best to check out some tips from folks who’ve done it before. In fact, even if you have done it before, it’s still a good idea to review best practices from time to time just to identify areas where you could improve.

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Before you get too far into your strategic planning process, check out our top 10 tips below — your quick guide to getting the most out of your strategic planning process:

• Pull together a diverse, yet appropriate, group of people to make up your planning team. Diversity leads to a better strategy. Bring together a small core team — between six and ten people — of leaders and managers who represent every area of the company.
• Allow time for big picture, strategic thinking. We tend to try to squeeze strategic planning discussions in between putting out fires and going on a much needed vacation. But to create a strategic plan, your team needs time to think big. Do whatever it takes to allow that time for big-picture thinking (including taking your team off-site).
• Get full commitment from key people in your organization. You can’t do it alone. If your team doesn’t buy into the planning process and the resulting strategic plan, you’re dead in the water.
• Allow for open and free discussion regardless of each person’s position within the organization. (This tip includes you — the CEO.) Don’t lead the planning sessions. Hire an outside facilitator, someone who doesn’t have any stake in your success. When you do, people wonder whether you’re trying to lead them down the path you wanted all along.  Encourage active participation, but don’t let any one person dominate the session.
• Think about execution before you start. It doesn’t matter how good the plan is if it isn’t executed.
• Use a facilitator, if your budget allows . Hire a trained professional who has no emotional investment in the outcome of the plan. An impartial third party can concentrate on the process instead of the end result and can ask the tough questions that others may fear to ask.
• Make your plan actionable. To have any chance at implementation, the plan must clearly articulate goals, action steps, responsibilities, accountability, and specific deadlines. And everyone must understand the plan and their role in it.
• Don’t write your plan in stone. Good strategic plans are fluid, not rigid and unbending. They allow you to adapt to changes in the marketplace.  Don’t be afraid to change your plan as necessary.
• Clearly articulate next steps after every session. Before closing the strategic planning session, clearly explain what comes next and who’s responsible for what. When you walk out of the room, everyone must fully understand what they’re responsible for and when to meet deadlines.
• Make strategy a habit, not just a retreat. Review the strategic plan for performance achievement no less than quarterly and as often as monthly or weekly. Focus on accountability for results and have clear and compelling consequences for unapproved missed deadlines.

Thanks, helpful to review others successes.

very helpful and practical

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Table of Contents

How to make a business plan

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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7 Key Strategic Planning Skills for Business Success

Deft strategic planning confers a sizable competitive advantage by sharpening enterprise focus, revealing blindspots early, and seamlessly aligning organization-wide efforts towards shared goals. Thus, honing strategic plan thinking capabilities becomes pivotal for leaders charting ambitious growth trajectories.

This blog covers why strategic planning matters, which underlying competencies it demands, and how professionals can systematically strengthen strategic acumen, steering their firms to unprecedented heights.

Why Does Strategic Planning Matter?

Strategic planning is a critical process that helps organizations define ambitious yet achievable long-term goals and lay out step-by-step roadmaps to reach them. It provides immense value in several key ways:

• Channels Energy Towards Key Goals Strategic planning brings a sharp focus on the handful of make-or-break goals that matter most for an organization’s success. This prevents resources and efforts from getting diffused across less impactful peripheral initiatives that merely seem urgent. Strategic planning sets apart the vital few from the trivial many.
• Anticipates Emerging Risks and Opportunities By mandating that strategy designers envision potential scenarios - both positive and negative - strategic planning builds organizational agility and resilience. It prompts proactive identification of looming threats that may require contingency planning. Similarly, it reveals openings for first-mover advantage through breakthrough initiatives in adjacent spaces.
• Ensures Organization-wide Alignment By transparently communicating enterprise-wide priorities identified through systematic strategic planning, organizations resolve departmental misalignments where siloed units may otherwise work at cross purposes. It brings coherence to collective efforts.
• Enables Course Corrections The regular reviews and progress tracking processes inherent in strategic planning cycles allow organizations to rapidly detect early signals when realities deviate materially from projections. This allows timely course corrections through informed pivots, saving precious time and resources. Meticulous strategic planning ensures budgetary, talent, and operational capabilities get efficiently channeled towards differentiated goals and minimize waste. Pitfalls like over-investing in non-core activities or duplicative competing efforts are averted through judicious allocation.
• Attracts Top Talent By boldly articulating an ambitious vision for the future, organizations inspire both current and prospective talent. Employees feel pride in contributing to outsized goals and team bonds while overcoming shared challenges. An aura of pioneering spirit retention and recruitment. In summary, separating hype from reality, strategic planning confers durable competitive strength to firms intentionally building this organizational capability. It is no panacea but ignored at one’s own peril. With disciplined adherence to its tenets and principles, business strategy unlocks immense latent potential for teams aligned around inspirational goals empowering their future.

What Competencies Shape Strategic Planning Excellence?

While different models exist, several fundamental capabilities remain vital for any successful strategic planning approach. Mastering these multidimensional strategic planning skills separates mediocre incrementalists from transformational strategic thinkers driving enduring growth.

Diagnostic Acumen

Strategic leaders boast the perceptiveness to read weak signals within steady trends and see early warnings of impending changes ahead of peers. Key aspects include:

• Subtle Pattern Spotting - Identify nuanced inflections in contextual factors from subtle cues. This allows for an accurate assessment of situational dynamics.
• Transition Sensing - Spot transitions from one maturity stage to another in the market lifecycle curve by analyzing business growth patterns.
• Opportunities/Threats Detection - Uncover latent niche opportunities or existential threats in the longer term from seemingly random data points today.

Systems Thinking

Top strategic thinkers conceptually connect disparate dots, creatively configuring them into ambitious yet viable future systems displaying seasoned judgment.

• Future Conceptualization - Design structured goal scenarios expanding capabilities balancing realism with idealism avoiding incrementalism.
• Inspirational Visioning - Portray desired future states vividly, appealing at emotional levels to rally collective spirit.
• Contingency Planning - Codify crisis response protocols for extreme scenarios, from wild card events to liquidity crunches.

Change Leadership

Beyond technical analysis, strategic leaders leverage political and cultural change management savvy to drive transformation.

• Stakeholder Alignment - Overcome resistance by appealing to the interests/values of influencers and securing requisite buy-in.
• Motivational Communication - Share reality while restoring hope, conveying authentic confidence in the collective capacity to prevail against challenges.
• Sustained Commitment - Remain resilient in adherence to strategic direction without wavering or diffusion during uncertainty typical of transitions.

Flawless Alignment

Ensuring strategic priorities in shared goals cascade down enterprises simplified into specific accountabilities prevents disjointed efforts.

• Goals Breakdown - Granularly decompose top-level goals into departmental, team, and individual OKRs enterprise-wide.
• Conflict Resolution - Foster harmony across functions by jointly resolving differences that hinder cross-departmental collaboration.
• Interdependence Identification - Intentionally structure workflows by identifying touchpoints demanding enterprise-wide synchronization.

Results Orientation

Instilling zeal for surpassing existing standards avoids complacency, while progress bars continually elevate as organizations evolve capabilities over time.

• Stretch Metrics - Institutionalize a chronic sense of constructive discontent with the status quo fueled by hunger for ambitious stretch goals.
• Ruthless Prioritization - Maintain unwavering focus on outcomes without distraction by peripheral matters or pet initiatives.
• Virtuous Progression - Raise performance bars as competencies strengthen in perpetuity while celebrating small wins, shaping a culture of excellence.

Together, these diverse but symbiotic capabilities make for strategic planning proficiency at scale, distinguishing outperforming entities. While ingrained early in childhood, components can be systematically nurtured later through dedicated grooming.

7 Ways Professionals Can Level Up Strategic Planning Skills

For both individuals and organizations seeking strategic planning elevation, the following are 7 actionable tactics:

1. Adopt Helicopter Perspectives

Rather than getting mired in granular everyday details, consciously zoom out to spot emerging sector patterns promising first-mover advantages or reductionist tactics missing the big picture.

• Carve out contemplation time pondering existential questions facing business.
• Debate strategy priorities with thought leaders beyond usual peer circles.
• Map core assumptions driving decisions and stress test them.

2. Learn Proven Frameworks

While no formulaic solutions exist in strategy, time-tested models provide guardrails for avoiding previous pitfalls.

• Master renowned foundations like Porter’s 5 Forces , SWOT , PESTEL, etc.
• Audit past successful and failed initiatives, discerning differentiating factors.
• Enroll in formal strategy programs offered by leading faculties.

3. Sharpen Analytical Capabilities

Help cohorts sift signals from noise by honing fact-based evaluation proficiency.

• Take courses elevating statistical analysis, financial modeling, and data science skills.
• Take up puzzles and participate in case competitions, building cognitive muscles.
• Take up advisory roles guiding strategy for early-stage ventures.

4. Design Scenarios Exhaustively

Stress test growth plans by charting scenarios spanning best, worst, and most likely cases given identifiable conditions.

• Use techniques like simulation modeling to form probabilistic assumptions.
• Red team proposed ideas of having contrarians poke holes, unearthing hidden flaws.
• Benchmark against analog contexts where similar plays unfolded successfully or flopped.

5. Secure Alignment Nimble Execution

Foster coherence across layers via transparent communications while empowering teams executing plans through distributed authority.

• Cascade goals into specific accountabilities across the hierarchy, preventing diffusion.
• Equip frontline colleagues closest to market realities with autonomy, taking decisive actions.
• Encourage surfacing deviations from projections quickly without fear of repercussions.

6. Plan For Pivots

In dynamic times, planning must evolve from rigid roadmaps to flexible playbooks deftly adapting momentum.

• Build contingency responses for high-impact scenarios rather than dismiss them as improbable.
• Accept key assumptions will be invalidated and represent temporary best knowledge.
• Maintain war chests, allowing capitalization should breakthrough opportunities arise.

7. Instill Accountability

Celebrate milestones met by linking progress to formal incentives and informal recognitions, enhancing morale.

• Quantify contributions via OKR goal fulfillment over relativistic model rewards.
• Share stories of teams overcoming setbacks through grit rather than glory for successes alone.
• Discuss missteps openly as learnings without ascribing blame.

Combined, such steps ingrain strategic planning excellence at individual and organizational levels, promising prudent vision setting and flawless execution.

The capacity to formulate robust strategies and align collective efforts toward ambitious targets represents an invaluable capability conferring market leadership. By studying concepts, shaping strategy, honing supporting skill sets, and applying learnings through guided practice, professionals unlock coveted strategic planning mastery, elevating their leadership impact and accelerating their ascent up organizational ladders.

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Organizational Planning Guide: Types of Plans, Steps, and Examples

Organizational planning is like charting your company’s path on a map. You need to know what direction you’re headed to stay competitive.

But what exactly is organizational planning and how do you do it effectively? This guide will cover:

The Different Components or Types of Organizational Plans?

The 5 Process Steps of Organizational Planning

Organizational planning examples.

Organizational Planning Tools

What is Organizational Planning?

Organizational planning is the process of defining a company’s reason for existing, setting goals aimed at realizing full potential, and creating increasingly discrete tasks to meet those goals.

Each phase of planning is a subset of the prior, with strategic planning being the foremost

There are four phases of a proper organizational plan: strategic, tactical, operational, and contingency. Each phase of planning is a subset of the prior, with strategic planning being the foremost.

Types of Organizational Planning

A strategic plan is the company’s big picture. It defines the company’s goals for a set period of time, whether that’s one year or ten, and ensures that those goals align with the company’s mission, vision, and values. Strategic planning usually involves top managers, although some smaller companies choose to bring all of their employees along when defining their mission, vision, and values.

The tactical strategy describes how a company will implement its strategic plan. A tactical plan is composed of several short-term goals, typically carried out within one year, that support the strategic plan. Generally, it’s the responsibility of middle managers to set and oversee tactical strategies, like planning and executing a marketing campaign.

Operational

Operational plans encompass what needs to happen continually, on a day-to-day basis, in order to execute tactical plans. Operational plans could include work schedules, policies, rules, or regulations that set standards for employees, as well as specific task assignments that relate to goals within the tactical strategy, such as a protocol for documenting and addressing work absences.

Contingency

Contingency plans wait in the wings in case of a crisis or unforeseen event. Contingency plans cover a range of possible scenarios and appropriate responses for issues varying from personnel planning to advanced preparation for outside occurrences that could negatively impact the business. Companies may have contingency plans for things like how to respond to a natural disaster, malfunctioning software, or the sudden departure of a C-level executive.

The organizational planning process includes five phases that, ideally, form a cycle.

Strategic, tactical, operational, and contingency planning fall within these five stages.

1. Develop the strategic plan

Steps in this initial stage include:

Review your mission, vision, and values

Gather data about your company, like performance-indicating metrics from your sales department

Perform a SWOT analysis; take stock of your company’s strengths, weaknesses, opportunities, and threats

Set big picture goals that take your mission, vision, values, data, and SWOT analysis into account

2. Translate the strategic plan into tactical steps

At this point, it’s time to create tactical plans. Bring in middle managers to help do the following:

Define short-term goals—quarterly goals are common—that support the strategic plan for each department, such as setting a quota for the sales team so the company can meet its strategic revenue goal

Develop processes for reviewing goal achievement to make sure strategic and tactical goals are being met, like running a CRM report every quarter and submitting it to the Chief Revenue Officer to check that the sales department is hitting its quota

Develop contingency plans, like what to do in case the sales team’s CRM malfunctions or there’s a data breach

3. Plan daily operations

Operational plans, or the processes that determine how individual employees spend their day, are largely the responsibility of middle managers and the employees that report to them. For example, the process that a sales rep follows to find, nurture, and convert a lead into a customer is an operational plan. Work schedules, customer service workflows, or GDPR policies that protect prospective customers’ information all aid a sales department in reaching its tactical goal—in this case, a sales quota—so they fall under the umbrella of operational plans.

This stage should include setting goals and targets that individual employees should hit during a set period.

Managers may choose to set some plans, such as work schedules, themselves. On the other hand, individual tasks that make up a sales plan may require the input of the entire team. This stage should also include setting goals and targets that individual employees should hit during a set period.

4. Execute the plans

It’s time to put plans into action. Theoretically, activities carried out on a day-to-day basis (defined by the operational plan) should help reach tactical goals, which in turn supports the overall strategic plan.

5. Monitor progress and adjust plans

No plan is complete without periods of reflection and adjustment. At the end of each quarter or the short-term goal period, middle managers should review whether or not they hit the benchmarks established in step two, then submit data-backed reports to C-level executives. For example, this is when the manager of the sales department would run a report analyzing whether or not a new process for managing the sales pipeline helped the team reach its quota. A marketing team, on the other hand, might analyze whether or not their efforts to optimize advertising and landing pages succeeded in generating a certain number of leads for the sales department.

Depending on the outcome of those reviews, your org may wish to adjust parts of its strategic, tactical, or operational plans. For example, if the sales team didn’t meet their quota their manager may decide to make changes to their sales pipeline operational plan.

These templates and examples can help you start thinking about how to format your organizational plan.

This is a single page two-year strategic plan for a fictional corporation. Notice that the goals listed in the “Strategic Objectives and Organization Goals” section follow the SMART goals model: They’re specific, measurable, actionable, relevant, and time-based.

Workforce Planning

Companies need to use workforce planning to analyze, forecast, and plan for the future of their personnel. Workforce planning helps identify skill gaps, inefficiencies, opportunities for employee growth, and to prepare for future staffing needs.

Use Pingboard as a tool to plan and unite your workforce. Start today for free !

This is a two-year action plan for an administration, which could also be described as a tactical plan. Organization-wide goals—aka strategic goals—that are relevant to this department are listed in the top section, while the more tactical goals for the manager of this department are listed below.

Check out this strategic plan template . You’ll notice that tasks for an individual employee fall under operational planning. Note the space within each item for the manager to leave feedback for the employee.

Organizational Planning is Vital for a Successful Business

While organizational planning is a long and complex process, it’s integral to the success of your company. Luckily, the process becomes more automatic and intuitive with regular planning and review meetings.

Use Pingboard’s org chart software to help you plan and communicate your strategy. With Pingboard users can build and share multiple versions of their org chart to help with succession plans, organization redesigns, merger and acquisitions plans. Pingboard also helps with hiring plans by allowing you to communicate open roles in your live org chart so employees understand where their company is growing and what roles they can apply for. Pingboard’s employee directory helps find successors for specific roles by allowing managers to search through their workforce for the skills and experience needed to fill a position.

Start planning today – risk free!

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10 Game-Changing Tips for Crafting an Unbeatable Business Plan

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Whether you’re starting your first business or a seasoned entrepreneur, a solid business plan is the foundation for success. It can help you anticipate essential issues and challenges before you start your business.

Studies show that entrepreneurs who take the time to write a business plan are 2.5 times more likely to follow through and get their business off the ground.

With over two decades of experience as an entrepreneur, I’ve crafted or assisted in developing business plans for countless startups and small businesses. From traditional 100-page plans to concise one-page strategies, my business plans have secured millions of dollars from investors. As a mentor, I’ve guided thousands of entrepreneurs in the U.S. and across the globe, helping them establish, manage, and expand their businesses.

Over the past three decades, I’ve tackled countless challenges in building successful businesses. In this guide, I share my experience, insights, and best practices for crafting traditional and one-page business plans.

What is a business plan, and why does it matter?

What is a business plan.

A business plan is a vital strategic tool that outlines a company's goals, strategies, and resources required to achieve those goals. It is essentially a blueprint for the future of the business, providing detailed plans in areas such as marketing, finance, operations, and management.

How can a business plan help you?

A well-crafted business plan provides clarity and direction for your team and helps attract potential investors by showcasing the viability and growth potential of the business. Furthermore, it helps identify potential risks and provides a roadmap for mitigating them.

A business plan can help you in the following ways:

• Clarity of vision. A well-crafted business plan serves as a roadmap, providing clear direction for the business. For instance, an organic skincare brand can use a business plan to detail how it will source ethically-produced ingredients and establish partnerships with eco-conscious retailers. A tech startup may use its business plan to illustrate the development pathway of its revolutionary app, from prototyping to market launch.
• Mitigating risks. Business plans can identify potential risks and provide strategies to reduce them through a risk management process . A restaurant, for instance, can outline risks such as food safety concerns or fluctuating food prices and propose risk management strategies. Meanwhile, a manufacturing company can use its business plan to address potential supply chain disruptions or machinery breakdowns and outline contingency plans.
• Attracting investors. Business plans can be invaluable tools for attracting investment. For example, a biotech firm might detail its innovative research and projected market share to attract investors. On the other hand, a sustainable fashion brand can highlight its unique business model and commitment to ethical practices to attract socially responsible investors.
• Strategic planning. A business plan is essential for strategic planning. A digital marketing agency, for instance, can outline its strategies for acquiring new clients and retaining current ones. Similarly, a logistics company could use its business plan to strategize about optimizing routes and improving delivery efficiency.
• Performance monitoring. Business plans can be used as benchmarks to monitor the company’s performance. For example, a fitness studio might have membership growth and retention targets, which can be tracked against the business plan. A retail business could similarly set sales targets for each product line and compare actual sales to projections in the plan.

In this article, we will distill the key concepts from our comprehensive guide on how to write a business plan . However, we strongly recommend you read the complete guide to gain an in-depth understanding and effectively tailor a plan to your unique business needs.

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Ten business plan types

Although most people think there’s only one type of business plan, this isn’t accurate. Businesses have different needs, and some require specialized business plan types. Here are some common types:

Mini business plans. These are short, concise plans that provide a high-level overview of a business. For a consultancy firm, a mini-plan could quickly outline services, target clients, and revenue streams.

Working plans. These are more detailed and include operational information. A retail store might use a working plan to detail its inventory management, supply chain logistics, and day-to-day operations.

Presentation plans are formal business plans that are presented to outsiders like investors or banks. A tech startup seeking venture capital would likely prepare a presentation plan emphasizing market potential and growth strategy.

Growth plans. These plans are for businesses that intend to scale. An e-commerce platform planning to expand its market might use a growth plan to chart out customer acquisition strategies and operational scalability.

Feasibility plans. These plans are used to determine if a business idea is worth pursuing. A restaurant chain looking to introduce a new menu item could create a feasibility plan to analyze cost, demand, and potential return.

Operations plans. These focus on the logistics of running a business. A manufacturing company could use an operations plan to detail production processes, equipment maintenance, and quality control measures.

Strategic plans. These provide an overview of a company’s strategy and how it plans to achieve its goals. A digital marketing agency might use a strategic plan to set client acquisition and retention targets and outline strategies to meet those targets.

Internal plans. These are designed for internal use to track the implementation of a strategy or project. An events management company could use an internal plan to track progress on organizing a major conference, detailing tasks, responsibilities, and timelines.

Lean startup plans. These are high-level summaries of your business strategy, often used by startups. A software development company might use a lean startup plan to summarize its business model, target customer segments, and key performance indicators (KPIs).

Exit plans. These outline a business’s strategy for exiting the market, usually through a sale, merger, or IPO. A health tech startup could have an exit plan detailing potential paths, such as acquisition by a larger company or an IPO.

How to develop a business plan and the six sections every plan needs

A traditional business plan has six sections. You might need to add other sections depending on your business and industry. But be sure you include at least the six sections we list below:

1. Executive summary

The Executive Summary is the first section of your business plan, but you should write it last. It’s a concise overview of your plan, covering the critical points in a high-level snapshot.

For example, a food delivery service’s executive summary might highlight the unique selling proposition of delivering locally sourced, organic meals. A tech startup, on the other hand, might emphasize its innovative AI-powered product that disrupts current market practices.

2. The opportunity

This section describes the problem your business solves or the need it fulfills. It should detail your target market and explain why your solution is uniquely positioned to address the problem.

For instance, a biotech firm might discuss the opportunity to develop a new drug to treat a prevalent health condition. Meanwhile, a children’s educational toy company might highlight the need for entertaining and cognitively stimulating toys for children’s development.

3. Marketing and sales plan

You outline your strategies for reaching your target audience and driving sales here. This can include pricing, promotion, distribution, and sales strategies.

A retail clothing store, for example, might focus on social media marketing and host pop-up events in trendy neighborhoods. A B2B software company might emphasize inbound marketing through content creation and a direct sales model targeting specific industries. It’s also essential to deliberate on whether or not to put your prices on your website .

4. The management team and company

This section presents your team’s qualifications and your company’s organizational structure. Highlight the skills and experience that each team member brings.

A fintech startup can emphasize its founders’ expertise in tech and finance. On the other hand, a restaurant should spotlight its team’s culinary and hospitality expertise.

5. Financial plan

The Financial Plan provides detailed projections of your business’s revenue, expenses, and profitability. It also outlines your funding requirements and how you plan to use the funds.

An e-commerce startup should present sales forecasts based on website traffic and conversion rates. A real estate development company could outline projected property sales and rental revenue.

6. Appendix

The Appendix contains supporting documents or additional information not included in the main body of the plan. This could include product photos, legal documents, or detailed market research.

For a manufacturing company, you could include product specifications or patent documentation. A service-based business like a consulting firm could include case studies demonstrating past success so that you can quickly show prospective investors supporting documents reinforcing the likelihood your business will succeed.

With a clear understanding of the traditional components of a business plan, let’s look at the process of constructing your plan. Here are ten crucial principles to guide you in crafting a business plan that fulfills its intended purpose and is a valuable reference in future years.

10 Tips for Crafting an Unbeatable Business Plan

Tip 1: Keep it simple and focused Tip 2: Conduct thorough market research Tip 3: Set realistic financial projections Tip 4: Define your operational processes Tip 5: Create a strong marketing plan Tip 6: Address legal and regulatory considerations Tip 7: Develop a financial plan Tip 8: Establish a marketing strategy Tip 9: Plan for scalability and growth Tip 10: Include an exit strategy

Here are ten proven tips to help you write a great business plan:

Tip 1: Keep it simple and focused

People are busy. Few read 50-page business plans. Even fewer read 100-page business plans. Most will read only the high-level executive summary and flip through other sections of your business plan.

A business plan doesn’t have to be complicated. Keep it simple, clear, and focused on your goals. Use readable fonts and a clean layout.

Your plan is a roadmap to guide your business, so make sure it’s easy to understand and follow.

Remember, you’re not reinventing the wheel here. For example, you can get a free business plan template for a traditional business plan and a one-page business plan .

And remember that there’s no universal business plan format. Use examples to compare what you like and don’t like, look at each plan’s business and revenue models, and build a business plan following the best practices you find in the example plans you read.

Pay special attention to executive summaries.

The executive summary of a business plan is designed to capture the reader’s attention and briefly explain your business, the problem you are solving, the target market, and critical financial projections. You can also include a brief mission statement in the summary.

If the executive summary lacks specific information or does not capture the reader’s attention, the rest of the plan might not be read.

If your executive summary is strong, you increase the prospects of having a further conversation with a potential investor or partner to make your pitch in person. So,

• Write the executive summary after you have written the rest of the business plan. This will allow you to summarize the larger details quickly.
• Keep it short. Include the essential steps with as little extra language as possible. Your goal is to excite the reader to read all the specific details in your business plan.
• Organize the executive summary based on the most vital points.
• Don’t talk about your management team’s passion for hard work.  These qualities are the minimum shared by all entrepreneurs.
• Don’t say you will be the next Facebook, Uber , or Amazon. Amateurs make this comparison to try and show how valuable their company could be. Instead, in your mission statement and business plan copy, focus on providing facts proving you have a strong company. It’s better if the investor gives you this accolade because they see the opportunity.

Here are five examples of how to keep focus and clarity when writing your business plan:

Example 1: Retail Clothing Store. A retail clothing store’s business plan should focus on its target market, the types of products it will offer, and its strategies for attracting customers. The plan should outline store location, pricing strategy, and merchandising techniques. Additionally, it should address seasonality and inventory management to ensure a balanced product offering throughout the year.

Example 2: E-commerce Business Selling Handmade Crafts. An e-commerce business selling handmade crafts should outline its product offerings, target audience , and marketing strategies for driving online traffic and sales. The plan must address shipping and fulfillment logistics, customer service policies, and procedures for dealing with returns and exchanges. Also, it should cover how the company will scale production to meet increased demand.

Example 3: Mobile App Development Company. A mobile app development company’s business plan should focus on the types of apps it specializes in, its target clientele, and its approach to app development and project management. The plan should outline the company’s pricing model, strategies for attracting clients, and methods for staying up-to-date with industry trends and technological advancements.

Example 4: Event Planning Agency. An event planning agency should focus its business plan on the types of events it specializes in (e.g., wedding planning , corporate events, nonprofit events ), its target market, and its approach to event management. The plan should outline the agency’s marketing and networking strategies, as well as its vendor relationships and strategies for managing event logistics, budgets, and client expectations.

Example 5: Boutique Fitness Studio. A boutique fitness studio’s business plan should focus on its fitness niche (e.g., yoga, pilates), target market, and strategies for attracting and retaining clients. The plan should outline the studio’s class offerings, membership options, and pricing strategy. Additionally, it should address instructor recruitment and training, facility management, and strategies for maintaining a positive and engaging studio atmosphere.

Tip 2: Conduct thorough market research

Market research is vital for understanding your industry, target audience, and competition. Gather market size, trends, and consumer preferences data for business decisions.

Don’t mess around – research everything thoroughly.

If you are launching a new business and expect to be the market leader in 2 years, you must demonstrate why this is possible and how you’ll meet this goal.

If you say your product will be viral , you must support this statement with facts.

If you say your management team is experienced and qualified to help the business succeed, you have to support that claim with resumes that demonstrate the experience of your team members.

It’s easy to lose credibility – and investors – if you’re making claims you can’t fully support.

Need specific insights on how to write a great business plan?

Here are five examples of the type of research businesses in different industries must do when writing a business plan:

Example 1: New Restaurant . To identify market gaps and opportunities, a new restaurant should research the local food scene, competitors, and customer preferences. The plan should include an analysis of the area’s demographics, popular cuisine types, and existing restaurants’ strengths and weaknesses. This research will inform menu development, pricing strategy, and overall restaurant concept .

Example 2: Online Tutoring Service. An online tutoring service should analyze the market for similar services, the demand for tutors in various subjects, and the target demographic’s preferences for online learning. The plan should address strategies for attracting tutors, developing a user-friendly platform, and marketing to students and parents. Additionally, it should consider differentiating itself from competitors by offering specialized subject matter expertise or personalized learning plans.

Example 3: Green Cleaning Service. A green cleaning service should research the demand for eco-friendly options, local competitors, and potential customers’ preferences and concerns. The plan should outline the company’s environmental policies, its selection of non-toxic cleaning products, and strategies for marketing its eco-friendly services. Additionally, it should consider potential partnerships with environmentally conscious organizations or businesses.

Example 4: Coworking Space. A coworking space should research the demand for shared office spaces in its target area, the existing supply, and potential customer’s preferences and needs. The plan should address the coworking space’s design, amenities, membership plans, and pricing strategy. It should also outline strategies for attracting and retaining members and potential partnerships with local businesses or networking events to foster a sense of community.

Example 5: Subscription Box Service. A subscription box service should research the market for similar offerings, target customer preferences, and trends in the subscription box industry. The plan should outline the service’s product curation process, packaging design, pricing strategy, and shipping logistics. It should also address marketing strategies to attract and retain subscribers and potential partnerships with influencers or niche communities to grow its customer base.

Tip 3: Set realistic financial projections

Accurate financial projections are crucial for securing funding and managing your business’s growth. Be realistic about your revenue, expenses, and growth potential, and be prepared to adjust your projections as your business evolves.

Here are five examples of the types of financial projections businesses in different industries must make in their business plan:

Example 1: Food Truck Business. A food truck business should create financial projections that account for the initial investment in the truck, equipment, and inventory. The plan should also factor in ongoing expenses such as fuel, permits, insurance, and staffing. Revenue projections should consider the truck’s daily sales, seasonality, and potential catering opportunities.

Example 2: Digital Marketing Agency. A digital marketing agency should create financial projections considering client acquisition costs, retainer fees, and potential project-based revenue. The plan should factor overhead costs such as office space, equipment, and staffing. Projections should also account for the time needed to establish a client base and the potential for fluctuating income based on client retention and project completion.

Example 3: Independent Bookstore. An independent bookstore should create financial projections considering the initial investment in inventory, store fixtures, and leasehold improvements. The plan should also consider ongoing expenses such as rent, utilities, and staffing. Revenue projections should consider the store’s sales, the potential for hosting events, and additional income streams like in-store cafes or merchandise sales.

Example 4: Home-Based Catering Business. A home-based catering business should create financial projections considering the initial kitchen equipment and inventory investment. The plan should also factor in ongoing expenses such as food costs, permits, insurance, and marketing. Revenue projections should consider the number and size of catering events, potential corporate clients, and seasonal demand.

Example 5: Mobile App Startup. A mobile app startup should create financial projections for the initial investment in app development, marketing, and user acquisition. The plan should also factor in ongoing expenses such as app maintenance, updates, and staffing. Revenue projections should consider potential income streams like in-app purchases, advertising, and subscription fees.

Tip 4: Define your operational processes

Clearly outline your business’s operational processes to ensure efficiency and consistency.

Detail how you will manage production, inventory, staffing, and distribution to provide a seamless experience to customers .

Here are five examples of the operational processes businesses in different industries must define in their business plan:

Example 1: Bakery. A bakery should detail its production schedule, inventory management, staff roles, and distribution channels to ensure consistent product availability and quality. The plan should also address strategies for managing seasonal demand, such as offering holiday-themed products or adjusting staffing levels.

Example 2: Software Development Company. A software development company must define its project management processes, team structure, and communication channels to keep projects on track and meet client expectations. The plan should also address strategies for acquiring new clients, such as networking events, online marketing, and strategic partnerships.

Example 3: Real Estate Agency. A real estate agency should outline its processes for listing properties, managing client relationships, and closing transactions. The plan should also address strategies for attracting new clients, such as hosting open houses, utilizing digital marketing, and participating in local community events.

Example 4: Pet Grooming Business. A pet grooming business should detail its grooming process, appointment scheduling, and inventory management to ensure a smooth and efficient customer experience. The plan should also address strategies for attracting new clients, such as offering loyalty programs, partnering with local pet stores or veterinarians, and utilizing social media marketing.

Example 5: Online Coaching Business. An online coaching business should outline its processes for onboarding new clients, delivering coaching sessions, and tracking clients’ progress. The plan should also address strategies for attracting new clients, such as offering free discovery calls, leveraging social media marketing , and creating valuable content like blog posts or webinars.

Tip 5: Create a strong marketing plan

A well-defined marketing plan is crucial for attracting and retaining customers.

Develop a plan that outlines your target audience, competitors, marketing channels, and strategies for promoting your products or services.

Some business owners avoid talking about potential competitors.

This is a mistake.

Unless you’re creating a new industry, you will have competitors. And you’ll need to figure out how to beat or compete with them.

You must do market research to understand your competitors and the industry. A good business plan that carefully lays out this information in a detailed target market analysis appears more credible and will better prepare you for success with your new business.

And potential investors and banks tend to trust business owners more when they see a detailed target market analysis in a business plan and a strategy for finding potential customers. They are more comfortable seeing this level of detail because they will see that the business owner is better prepared to launch their business and make money over the long term.

There are multiple methods for conveying this data, referred to as TAM, SAM, and SOM .

TAM is the Total Addressable Market. This would show investors the yearly revenue opportunity or units sold for your product or service if you achieved 100% of the available market. It’s a quick way to address the potential size of your operating space.

SAM is the Serviceable Addressable Market. You intend to serve this subset of TAM (Total Addressable Market) with your service or product.

SOM is the Serviceable Obtainable Market. This is the subset of SAM (Serviceable Addressable Market) that is realistic to achieve. If you can get your business to meet this goal, you will have succeeded.

Invest some time and effort and do it correctly. A business can’t succeed if the owners don’t understand their industry, target customers, or the competition.

Here are five examples of the ways to focus the marketing plan of your business plan:

Example 1: Specialty Coffee Shop. A specialty coffee shop should develop a marketing plan that targets coffee enthusiasts, local professionals, and students. The plan should leverage social media, local print media, and in-store promotions to showcase its unique offerings, such as artisanal coffee, specialty drinks, and a cozy atmosphere.

Example 2: Graphic Design Studio. A graphic design studio should create a marketing plan that targets local businesses, entrepreneurs, and organizations. The plan should utilize online marketing (e.g., social media, email marketing), networking events, and local partnerships to showcase the studio’s design expertise in creating unique company logos and website design , and attracting new clients.

Example 3: Organic Skin Care Brand. An organic skincare brand should develop a marketing plan that targets eco-conscious consumers and those interested in natural beauty products . The plan should leverage influencer marketing, content marketing, and online advertising to promote the brand’s unique selling points , such as sustainable packaging and ethically sourced ingredients.

Example 4: Fitness Center. A fitness center should create a marketing plan that targets local residents interested in improving their health and wellness. The plan should utilize traditional advertising (e.g., billboards and local radio ads) and digital marketing (e.g., social media and email campaigns ) to promote its membership options, class offerings, and state-of-the-art facilities.

Example 5: Virtual Reality Arcade. A virtual reality arcade should develop a marketing plan that targets gamers, tech enthusiasts, and families looking for unique entertainment options. The plan should utilize online advertising, social media, and local partnerships to showcase the arcade’s cutting-edge technology and immersive gaming experiences.

Tip 6: Address legal and regulatory considerations

Outline any legal and regulatory requirements relevant to your industry, the type of business structure you’ve selected, and how your business will meet these requirements.

Here are five examples of the legal and regulatory requirements businesses in different industries should address in a business plan:

Example 1: Food Truck Business. A food truck business must comply with local health department regulations, obtain necessary permits, and adhere to zoning requirements. The business plan should outline the steps required to obtain the necessary permits and the strategy for ensuring ongoing compliance with health and safety regulations.

Example 2: E-commerce Store. An e-commerce store must navigate various legal considerations, including privacy policies, data protection regulations, and sales tax collection. The business plan should outline how the store will comply with these requirements and any additional industry-specific rules that may apply.

Example 3: Home Health Care Agency. A home health care agency must adhere to strict licensing and accreditation requirements and HIPAA regulations for protecting patient information. The business plan should detail the steps required to obtain proper licensing, maintain accreditation, and ensure ongoing compliance with healthcare regulations.

Example 4: Real Estate Agency. A real estate agency must comply with state licensing requirements, adhere to fair housing laws, and maintain proper records. The business plan should outline how the agency will obtain the necessary licenses, ensure compliance with fair housing laws, and establish record-keeping procedures.

Example 5: Craft Brewery. A craft brewery must navigate a complex landscape of federal, state, and local regulations related to alcohol production, distribution, and sales. The business plan should detail how the brewery will obtain the required permits, maintain compliance with alcohol regulations, and establish relationships with distributors and retailers.

Tip 7: Develop a financial plan

A comprehensive financial plan is essential for any business. Include a detailed financial forecast outlining your revenue projections, expenses, and cash flow analysis.

Here are five examples of what a financial plan for businesses in different industries should address in a business plan:

Example 1: Subscription Box Service. A subscription box service should include a financial plan detailing the costs of sourcing products, packaging, shipping, and marketing. The plan should also outline revenue projections based on the number of subscribers, average customer lifetime value, and potential upsell opportunities.

Example 2: Clothing Boutique. A clothing boutique should develop a financial plan for inventory costs, rent, utilities, marketing expenses, and employee wages. The plan should also include revenue projections based on foot traffic, average transaction value, and seasonal trends.

Example 3: Mobile App Development Company. A mobile app development company should create a financial plan that outlines the costs of software development , marketing, and ongoing maintenance. The plan should also include revenue projections based on app sales, in-app purchases, and potential partnerships or licensing deals.

Example 4: Coworking Space. A coworking space should develop a financial plan for lease costs, utilities, insurance, marketing expenses, and staff wages. The plan should also include revenue projections based on the number of members, membership pricing tiers, and ancillary services like event rentals or meeting room bookings.

Example 5: Catering Business. A catering business should create a financial plan outlining food, equipment, transportation, and marketing costs. The plan should also include revenue projections based on the number of events, average event size, and pricing structure.

Tip 8: Establish a marketing strategy

Develop a comprehensive marketing strategy outlining how to reach your target audience, build brand awareness, and drive sales.

Here are five examples of what should be included in the marketing strategy for businesses in different industries:

Example 1: Fitness Studio. A fitness studio should develop a marketing strategy that includes social media campaigns, influencer partnerships , and local community outreach. The plan should also outline promotional offers, such as introductory pricing or referral incentives, to attract new members and retain existing ones.

Example 2: Organic Grocery Store. An organic grocery store should create a marketing strategy that emphasizes the store’s commitment to sustainability , local sourcing, and high-quality products. The plan should include strategies for reaching eco-conscious consumers, such as targeted social media ads, partnerships with local farmers, and participation in community events.

Example 3: Software-as-a-Service (SaaS) Company. A SaaS company should develop a marketing strategy focusing on content marketing, SEO , and targeted advertising to reach potential customers. The plan should also include strategies for customer retention, such as email marketing campaigns and personalized onboarding experiences .

Example 4: Restaurant. A restaurant should create a marketing strategy that includes a mix of online and offline tactics, such as social media promotions, local print advertising, and hosting special events. The plan should also outline strategies for generating positive reviews and word-of-mouth referrals.

Example 5: Digital Marketing Agency. A digital marketing agency should develop a marketing strategy that showcases its expertise and success stories through case studies, blog posts, and webinars. The plan should include targeted advertising campaigns and networking events to attract new clients and build industry relationships.

Tip 9: Plan for scalability and growth

Consider how your business can scale and grow over time, and outline strategies for managing this growth in your business plan.

Here are five examples of how businesses in different industries should address scalability and growth in their business plan:

Example 1: Online Tutoring Platform. An online tutoring platform should outline plans to expand its tutor network, improve its technology, and enter new markets. The plan should also consider potential partnerships with schools or educational institutions to drive growth.

Example 2: Bakery. A bakery should include plans for scaling its operations, such as opening additional locations, expanding its product line, or offering catering services. The plan should also outline strategies for managing increased production and staffing needs as the business grows.

Example 3: Graphic Design Agency. A graphic design agency should outline plans for scaling its services, such as hiring additional designers, expanding into new service areas, or partnering with complementary businesses. The plan should also include strategies for managing increased project volume and maintaining quality standards.

Example 4: Solar Panel Installation Company. A solar panel installation company should plan for growth by outlining strategies for entering new markets, expanding its service offerings, or forming partnerships with complementary businesses. The plan should also consider the potential impact of regulatory changes or technological advancements on the industry.

Example 5: Event Planning Company. An event planning company should outline growth plans, such as expanding its service offerings, targeting new market segments, or forming partnerships with complementary businesses. The plan should also include strategies for managing increased demand and maintaining high levels of customer satisfaction.

Tip 10: Include an exit strategy

Outline potential exit strategies for your business, such as a merger, acquisition, or initial public offering (IPO). This will help you plan for the future and demonstrate to investors that you have a long-term vision for your business.

Here are five examples of how businesses in different industries can summarize their exit strategy in a business plan:

Example 1: Mobile Game Development Studio. A mobile game development studio might plan for an exit strategy that includes being acquired by a larger gaming company, merging with another studio, or pursuing an IPO if the company achieves significant success.

Example 2: Healthtech Startup. A health tech startup could consider exit strategies such as being acquired by a larger healthcare or technology company, merging with a complementary business, or pursuing an IPO if the company experiences rapid growth and widespread adoption of its products or services.

Example 3: E-commerce Platform. An e-commerce platform might plan for exit strategies such as being acquired by a larger retailer, merging with a complementary business, or pursuing an IPO if the platform achieves significant market share and revenue growth.

Example 4: Boutique Marketing Agency. A boutique marketing agency could consider exit strategies like being acquired by a larger agency, merging with a complementary business to expand its service offerings, or pursuing a management buyout if the founders wish to retire or move on to other ventures.

Example 5: Green Energy Company. A green energy company might plan for exit strategies such as being acquired by a larger energy company, merging with a complementary business in the renewable energy space, or pursuing an IPO if the company achieves significant market share and technological advancements.

When crafting a comprehensive business plan, remember to focus on your target audience, clearly define your business model, conduct thorough market research, establish a strong organizational structure, create realistic financial projections, set strategic goals, develop a marketing strategy, plan for scalability and growth, and include an exit strategy.

But remember that most people don’t invest in a business plan.

Most people invest in a person.

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• What is strategic planning? A 5-step gu ...

What is strategic planning? A 5-step guide

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. In this article, we'll guide you through the strategic planning process, including why it's important, the benefits and best practices, and five steps to get you from beginning to end.

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. The strategic planning process informs your organization’s decisions, growth, and goals.

Strategic planning helps you clearly define your company’s long-term objectives—and maps how your short-term goals and work will help you achieve them. This, in turn, gives you a clear sense of where your organization is going and allows you to ensure your teams are working on projects that make the most impact. Think of it this way—if your goals and objectives are your destination on a map, your strategic plan is your navigation system.

In this article, we walk you through the 5-step strategic planning process and show you how to get started developing your own strategic plan.

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What is strategic planning?

Strategic planning is a business process that helps you define and share the direction your company will take in the next three to five years. During the strategic planning process, stakeholders review and define the organization’s mission and goals, conduct competitive assessments, and identify company goals and objectives. The product of the planning cycle is a strategic plan, which is shared throughout the company.

What is a strategic plan?

A strategic plan is the end result of the strategic planning process. At its most basic, it’s a tool used to define your organization’s goals and what actions you’ll take to achieve them.

Typically, your strategic plan should include: 

Your company’s mission statement

Your organizational goals, including your long-term goals and short-term, yearly objectives

Any plan of action, tactics, or approaches you plan to take to meet those goals

What are the benefits of strategic planning?

Strategic planning can help with goal setting and decision-making by allowing you to map out how your company will move toward your organization’s vision and mission statements in the next three to five years. Let’s circle back to our map metaphor. If you think of your company trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from point A (where you are now) to point B (where you want to be in a few years).

When you create and share a clear strategic plan with your team, you can:

Build a strong organizational culture by clearly defining and aligning on your organization’s mission, vision, and goals.

Align everyone around a shared purpose and ensure all departments and teams are working toward a common objective.

Proactively set objectives to help you get where you want to go and achieve desired outcomes.

Promote a long-term vision for your company rather than focusing primarily on short-term gains.

Ensure resources are allocated around the most high-impact priorities.

Define long-term goals and set shorter-term goals to support them.

Assess your current situation and identify any opportunities—or threats—allowing your organization to mitigate potential risks.

Create a proactive business culture that enables your organization to respond more swiftly to emerging market changes and opportunities.

What are the 5 steps in strategic planning?

The strategic planning process involves a structured methodology that guides the organization from vision to implementation. The strategic planning process starts with assembling a small, dedicated team of key strategic planners—typically five to 10 members—who will form the strategic planning, or management, committee. This team is responsible for gathering crucial information, guiding the development of the plan, and overseeing strategy execution.

Once you’ve established your management committee, you can get to work on the planning process. 

Step 1: Assess your current business strategy and business environment

Before you can define where you’re going, you first need to define where you are. Understanding the external environment, including market trends and competitive landscape, is crucial in the initial assessment phase of strategic planning.

To do this, your management committee should collect a variety of information from additional stakeholders, like employees and customers. In particular, plan to gather:

Relevant industry and market data to inform any market opportunities, as well as any potential upcoming threats in the near future.

Customer insights to understand what your customers want from your company—like product improvements or additional services.

Employee feedback that needs to be addressed—whether about the product, business practices, or the day-to-day company culture.

Consider different types of strategic planning tools and analytical techniques to gather this information, such as:

A balanced scorecard to help you evaluate four major elements of a business: learning and growth, business processes, customer satisfaction, and financial performance.

A SWOT analysis to help you assess both current and future potential for the business (you’ll return to this analysis periodically during the strategic planning process). 

To fill out each letter in the SWOT acronym, your management committee will answer a series of questions:

What does your organization currently do well?

What separates you from your competitors?

What are your most valuable internal resources?

What tangible assets do you have?

What is your biggest strength? 

Weaknesses:

What does your organization do poorly?

What do you currently lack (whether that’s a product, resource, or process)?

What do your competitors do better than you?

What, if any, limitations are holding your organization back?

What processes or products need improvement? 

Opportunities:

What opportunities does your organization have?

How can you leverage your unique company strengths?

Are there any trends that you can take advantage of?

How can you capitalize on marketing or press opportunities?

Is there an emerging need for your product or service? 

What emerging competitors should you keep an eye on?

Are there any weaknesses that expose your organization to risk?

Have you or could you experience negative press that could reduce market share?

Is there a chance of changing customer attitudes towards your company? 

Step 2: Identify your company’s goals and objectives

To begin strategy development, take into account your current position, which is where you are now. Then, draw inspiration from your vision, mission, and current position to identify and define your goals—these are your final destination. 

To develop your strategy, you’re essentially pulling out your compass and asking, “Where are we going next?” “What’s the ideal future state of this company?” This can help you figure out which path you need to take to get there.

During this phase of the planning process, take inspiration from important company documents, such as:

Your mission statement, to understand how you can continue moving towards your organization’s core purpose.

Your vision statement, to clarify how your strategic plan fits into your long-term vision.

Your company values, to guide you towards what matters most towards your company.

Your competitive advantages, to understand what unique benefit you offer to the market.

Your long-term goals, to track where you want to be in five or 10 years.

Your financial forecast and projection, to understand where you expect your financials to be in the next three years, what your expected cash flow is, and what new opportunities you will likely be able to invest in.

Step 3: Develop your strategic plan and determine performance metrics

Now that you understand where you are and where you want to go, it’s time to put pen to paper. Take your current business position and strategy into account, as well as your organization’s goals and objectives, and build out a strategic plan for the next three to five years. Keep in mind that even though you’re creating a long-term plan, parts of your plan should be created or revisited as the quarters and years go on.

As you build your strategic plan, you should define:

Company priorities for the next three to five years, based on your SWOT analysis and strategy.

Yearly objectives for the first year. You don’t need to define your objectives for every year of the strategic plan. As the years go on, create new yearly objectives that connect back to your overall strategic goals . 

Related key results and KPIs. Some of these should be set by the management committee, and some should be set by specific teams that are closer to the work. Make sure your key results and KPIs are measurable and actionable. These KPIs will help you track progress and ensure you’re moving in the right direction.

Budget for the next year or few years. This should be based on your financial forecast as well as your direction. Do you need to spend aggressively to develop your product? Build your team? Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for those.

A high-level project roadmap . A project roadmap is a tool in project management that helps you visualize the timeline of a complex initiative, but you can also create a very high-level project roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or years to make the plan more actionable and understandable.

Step 4: Implement and share your plan

Now it’s time to put your plan into action. Strategy implementation involves clear communication across your entire organization to make sure everyone knows their responsibilities and how to measure the plan’s success. 

Make sure your team (especially senior leadership) has access to the strategic plan, so they can understand how their work contributes to company priorities and the overall strategy map. We recommend sharing your plan in the same tool you use to manage and track work, so you can more easily connect high-level objectives to daily work. If you don’t already, consider using a work management platform .  

A few tips to make sure your plan will be executed without a hitch: 

Communicate clearly to your entire organization throughout the implementation process, to ensure all team members understand the strategic plan and how to implement it effectively. 

Define what “success” looks like by mapping your strategic plan to key performance indicators.

Ensure that the actions outlined in the strategic plan are integrated into the daily operations of the organization, so that every team member's daily activities are aligned with the broader strategic objectives.

Utilize tools and software—like a work management platform—that can aid in implementing and tracking the progress of your plan.

Regularly monitor and share the progress of the strategic plan with the entire organization, to keep everyone informed and reinforce the importance of the plan.

Establish regular check-ins to monitor the progress of your strategic plan and make adjustments as needed. 

Step 5: Revise and restructure as needed

Once you’ve created and implemented your new strategic framework, the final step of the planning process is to monitor and manage your plan.

Remember, your strategic plan isn’t set in stone. You’ll need to revisit and update the plan if your company changes directions or makes new investments. As new market opportunities and threats come up, you’ll likely want to tweak your strategic plan. Make sure to review your plan regularly—meaning quarterly and annually—to ensure it’s still aligned with your organization’s vision and goals.

Keep in mind that your plan won’t last forever, even if you do update it frequently. A successful strategic plan evolves with your company’s long-term goals. When you’ve achieved most of your strategic goals, or if your strategy has evolved significantly since you first made your plan, it might be time to create a new one.

Build a smarter strategic plan with a work management platform

To turn your company strategy into a plan—and ultimately, impact—make sure you’re proactively connecting company objectives to daily work. When you can clarify this connection, you’re giving your team members the context they need to get their best work done. 

A work management platform plays a pivotal role in this process. It acts as a central hub for your strategic plan, ensuring that every task and project is directly tied to your broader company goals. This alignment is crucial for visibility and coordination, allowing team members to see how their individual efforts contribute to the company’s success. 

By leveraging such a platform, you not only streamline workflow and enhance team productivity but also align every action with your strategic objectives—allowing teams to drive greater impact and helping your company move toward goals more effectively. 

Strategic planning FAQs

Still have questions about strategic planning? We have answers.

Why do I need a strategic plan?

A strategic plan is one of many tools you can use to plan and hit your goals. It helps map out strategic objectives and growth metrics that will help your company be successful.

When should I create a strategic plan?

You should aim to create a strategic plan every three to five years, depending on your organization’s growth speed.

Since the point of a strategic plan is to map out your long-term goals and how you’ll get there, you should create a strategic plan when you’ve met most or all of them. You should also create a strategic plan any time you’re going to make a large pivot in your organization’s mission or enter new markets. 

What is a strategic planning template?

A strategic planning template is a tool organizations can use to map out their strategic plan and track progress. Typically, a strategic planning template houses all the components needed to build out a strategic plan, including your company’s vision and mission statements, information from any competitive analyses or SWOT assessments, and relevant KPIs.

What’s the difference between a strategic plan vs. business plan?

A business plan can help you document your strategy as you’re getting started so every team member is on the same page about your core business priorities and goals. This tool can help you document and share your strategy with key investors or stakeholders as you get your business up and running.

You should create a business plan when you’re: 

Just starting your business

Significantly restructuring your business

If your business is already established, you should create a strategic plan instead of a business plan. Even if you’re working at a relatively young company, your strategic plan can build on your business plan to help you move in the right direction. During the strategic planning process, you’ll draw from a lot of the fundamental business elements you built early on to establish your strategy for the next three to five years.

What’s the difference between a strategic plan vs. mission and vision statements?

Your strategic plan, mission statement, and vision statements are all closely connected. In fact, during the strategic planning process, you will take inspiration from your mission and vision statements in order to build out your strategic plan.

Simply put: 

A mission statement summarizes your company’s purpose.

A vision statement broadly explains how you’ll reach your company’s purpose.

A strategic plan pulls in inspiration from your mission and vision statements and outlines what actions you’re going to take to move in the right direction. 

For example, if your company produces pet safety equipment, here’s how your mission statement, vision statement, and strategic plan might shake out:

Mission statement: “To ensure the safety of the world’s animals.” 

Vision statement: “To create pet safety and tracking products that are effortless to use.” 

Your strategic plan would outline the steps you’re going to take in the next few years to bring your company closer to your mission and vision. For example, you develop a new pet tracking smart collar or improve the microchipping experience for pet owners. 

What’s the difference between a strategic plan vs. company objectives?

Company objectives are broad goals. You should set these on a yearly or quarterly basis (if your organization moves quickly). These objectives give your team a clear sense of what you intend to accomplish for a set period of time. 

Your strategic plan is more forward-thinking than your company goals, and it should cover more than one year of work. Think of it this way: your company objectives will move the needle towards your overall strategy—but your strategic plan should be bigger than company objectives because it spans multiple years.

What’s the difference between a strategic plan vs. a business case?

A business case is a document to help you pitch a significant investment or initiative for your company. When you create a business case, you’re outlining why this investment is a good idea, and how this large-scale project will positively impact the business. 

You might end up building business cases for things on your strategic plan’s roadmap—but your strategic plan should be bigger than that. This tool should encompass multiple years of your roadmap, across your entire company—not just one initiative.

What’s the difference between a strategic plan vs. a project plan?

A strategic plan is a company-wide, multi-year plan of what you want to accomplish in the next three to five years and how you plan to accomplish that. A project plan, on the other hand, outlines how you’re going to accomplish a specific project. This project could be one of many initiatives that contribute to a specific company objective which, in turn, is one of many objectives that contribute to your strategic plan. 

What’s the difference between strategic management vs. strategic planning?

A strategic plan is a tool to define where your organization wants to go and what actions you need to take to achieve those goals. Strategic planning is the process of creating a plan in order to hit your strategic objectives.

Strategic management includes the strategic planning process, but also goes beyond it. In addition to planning how you will achieve your big-picture goals, strategic management also helps you organize your resources and figure out the best action plans for success. 

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Effective Planning Principles for Small Businesses

Business Planning Guidelines Make Business Planning Easier

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.

Providing Real Timely Information

Creating an action-based business plan, identifying risks and challenges, business planning and ethics.

If you're interested in starting a business, you will need to write a solid business plan . This plan has two main purposes. If external financing is needed, it helps attract investors or obtain a bank loan. It also serves as a road map from start-up through the life of your business. It helps you stay focused on the goals you set initially and can be modified to adapt to future changes in the industry.

There are certain items that you will need to consider to begin creating a successful business plan.

A good business plan should be based on current data. It should include specific information about your company, as well as other details such as industry outlook, target audience, services and products, marketing strategy, and funding.

However, before you begin writing your business plan you will need to gather information to help you identify priorities and make decisions. This may include research on target demographics, the market , and potential competitors .

The Small Business Administration provides guidance and templates for writing both a traditional and lean startup business plan.

A well-thought-out business plan provides detailed information on business goals and how they will be achieved. It's a realistic, attainable plan that describes exactly how objectives will be met.

To determine your company's goals, start by looking at the SMART goal-setting strategy. SMART can guide you in creating goals that are specific, measurable, achievable, relevant, and time-based. Note that goals are not set in stone and may need to be modified to meet changing customer needs.

Make sure your business plan is clear and to the point. Avoid using industry jargon and acronyms, so it is understandable to those unfamiliar with the industry.

Successful business planning involves not only assessing potential risks but coming up with ways to mitigate them. One strategy is to create a risk management plan . This helps prepare a company for dealing with various risks before they cause serious financial loss.

Types of common business risks include fines and penalties from noncompliance, lost revenue and profits, and loss of reputation.

There are many types of strategies to increase your business’s profits, however, some may be unethical—or even illegal. Before you make them part of your business plan, consider if they are ethical. In other words, do they support or enhance your values and the values that you hope are shared by society?

To avoid any legal liability, be sure to understand the customs and regulations applicable to your business.

Adopting unethical practices comes with the risk of being caught. It can cost you in expensive fines and penalties, as well as your reputation in the industry. This can result in the ultimate cost of losing your business.

Business planning is critical if you want your business to survive and succeed. It is not only a tool for attracting investors or getting a loan but serves as a plan that can guide you through the life of your business. By creating a realistic, actionable business plan, you have taken the first step to becoming a successful business owner.

Business Financial Plan Example: Strategies and Best Practices

Any successful endeavor begins with a robust plan – and running a prosperous business is no exception. Careful strategic planning acts as the bedrock on which companies build their future. One of the most critical aspects of this strategic planning is the creation of a detailed business financial plan. This plan serves as a guide, helping businesses navigate their way through the complex world of finance, including revenue projection, cost estimation, and capital expenditure, to name just a few elements. However, understanding what a business financial plan entails and how to implement it effectively can often be challenging. With multiple components to consider and various economic factors at play, the financial planning process may appear daunting to both new and established business owners.

This is where we come in. In this comprehensive article, we delve into the specifics of a business financial plan. We discuss its importance, the essential elements that make it up, and the steps to craft one successfully. Furthermore, we provide a practical example of a business financial plan in action, drawing upon real-world-like scenarios and strategies. By presenting the best practices and demonstrating how to employ them, we aim to equip business owners and entrepreneurs with the tools they need to create a robust, realistic, and efficient business financial plan. This in-depth guide will help you understand not only how to plan your business finances but also how to use this plan as a roadmap, leading your business towards growth, profitability, and overall financial success. Whether you're a seasoned business owner aiming to refine your financial strategies or an aspiring entrepreneur at the beginning of your journey, this article is designed to guide you through the intricacies of business financial planning and shed light on the strategies that can help your business thrive.

Understanding a Business Financial Plan

At its core, a business financial plan is a strategic blueprint that sets forth how a company will manage and navigate its financial operations, guiding the organization towards its defined fiscal objectives. It encompasses several critical aspects of a business's financial management, such as revenue projection, cost estimation, capital expenditure, cash flow management, and investment strategies.

Revenue projection is an estimate of the revenue a business expects to generate within a specific period. It's often based on market research, historical data, and educated assumptions about future market trends. Cost estimation, on the other hand, involves outlining the expenses a business anticipates incurring in its operations. Together, revenue projection and cost estimation can give a clear picture of a company's expected profitability. Capital expenditure refers to the funds a company allocates towards the purchase or maintenance of long-term assets like machinery, buildings, and equipment. Understanding capital expenditure is vital as it can significantly impact a business's operational capacity and future profitability. The cash flow management aspect of a business financial plan involves monitoring, analyzing, and optimizing the company's cash inflows and outflows. A healthy cash flow ensures that a business can meet its short-term obligations, invest in its growth, and provide a buffer for future uncertainties. Lastly, a company's investment strategies are crucial for its growth and sustainability. They might include strategies for raising capital, such as issuing shares or securing loans, or strategies for investing surplus cash, like purchasing assets or investing in market securities.

A well-developed business financial plan, therefore, doesn't just portray the company's current financial status; it also serves as a roadmap for the business's fiscal operations, enabling it to navigate towards its financial goals. The plan acts as a guide, providing insights that help business owners make informed decisions, whether they're about day-to-day operations or long-term strategic choices. In a nutshell, a business financial plan is a key tool in managing a company's financial resources effectively and strategically. It allows businesses to plan for growth, prepare for uncertainties, and strive for financial sustainability and success.

Essential Elements of a Business Financial Plan

A comprehensive financial plan contains several crucial elements, including:

• Sales Forecast : The sales forecast represents the business's projected sales revenues. It is often broken down into segments such as products, services, or regions.
• Expenses Budget : This portion of the plan outlines the anticipated costs of running the business. It includes fixed costs (rent, salaries) and variable costs (marketing, production).
• Cash Flow Statement : This statement records the cash that comes in and goes out of a business, effectively portraying its liquidity.
• Income Statements : Also known as profit and loss statements, income statements provide an overview of the business's profitability over a given period.
• Balance Sheet : This snapshot of a company's financial health shows its assets, liabilities, and equity.

Crafting a Business Financial Plan: The Steps

Developing a business financial plan requires careful analysis and planning. Here are the steps involved:

Step 1: Set Clear Financial Goals

The initial stage in crafting a robust business financial plan involves the establishment of clear, measurable financial goals. These objectives serve as your business's financial targets and compass, guiding your company's financial strategy. These goals can be short-term, such as improving quarterly sales or reducing monthly overhead costs, or they can be long-term, such as expanding the business to a new location within five years or doubling the annual revenue within three years. The goals might include specific targets such as increasing revenue by a particular percentage, reducing costs by a specific amount, or achieving a certain profit margin. Setting clear goals provides a target to aim for and allows you to measure your progress over time.

Step 2: Create a Sales Forecast

The cornerstone of any business financial plan is a robust sales forecast. This element of the plan involves predicting the sales your business will make over a given period. This estimate should be based on comprehensive market research, historical sales data, an understanding of industry trends, and the impact of any marketing or promotional activities. Consider the business's growth rate, the overall market size, and seasonal fluctuations in demand. Remember, your sales forecast directly influences the rest of your financial plan, particularly your budgets for expenses and cash flow, so it's critical to make it as accurate and realistic as possible.

Step 3: Prepare an Expense Budget

The next step involves preparing a comprehensive expense budget that covers all the costs your business is likely to incur. This includes fixed costs, such as rent or mortgage payments, salaries, insurance, and other overheads that remain relatively constant regardless of your business's level of output. It also includes variable costs, such as raw materials, inventory, marketing and advertising expenses, and other costs that fluctuate in direct proportion to the level of goods or services you produce. By understanding your expense budget, you can determine how much revenue your business needs to generate to cover costs and become profitable.

Step 4: Develop a Cash Flow Statement

One of the most crucial elements of your financial plan is the cash flow statement. This document records all the cash that enters and leaves your business, presenting a clear picture of your company's liquidity. Regularly updating your cash flow statement allows you to monitor the cash in hand and foresee any potential shortfalls. It helps you understand when cash comes into your business from sales and when cash goes out of your business due to expenses, giving you insights into your financial peaks and troughs and enabling you to manage your cash resources more effectively.

Step 5: Prepare Income Statements and Balance Sheets

Another vital part of your business financial plan includes the preparation of income statements and balance sheets. An income statement, also known as a Profit & Loss (P&L) statement, provides an overview of your business's profitability over a certain period. It subtracts the total expenses from total revenue to calculate net income, providing valuable insights into the profitability of your operations.

On the other hand, the balance sheet provides a snapshot of your company's financial health at a specific point in time. It lists your company's assets (what the company owns), liabilities (what the company owes), and equity (the owner's or shareholders' investment in the business). These documents help you understand where your business stands financially, whether it's making a profit, and how your assets, liabilities, and equity balance out.

Step 6: Revise Your Plan Regularly

It's important to remember that a financial plan is not a static document, but rather a living, evolving roadmap that should adapt to your business's changing circumstances and market conditions. As such, regular reviews and updates are crucial. By continually revisiting and revising your plan, you can ensure it remains accurate, relevant, and effective. You can adjust your forecasts as needed, respond to changes in the business environment, and stay on track towards achieving your financial goals. By doing so, you're not only keeping your business financially healthy but also setting the stage for sustained growth and success.

Business Financial Plan Example: Joe’s Coffee Shop

Now, let's look at a practical example of a financial plan for a hypothetical business, Joe’s Coffee Shop.

Sales Forecast

When constructing his sales forecast, Joe takes into account several significant factors. He reviews his historical sales data, identifies and understands current market trends, and evaluates the impact of any upcoming promotional events. With his coffee shop located in a bustling area, Joe expects to sell approximately 200 cups of coffee daily. Each cup is priced at $5, which gives him a daily sales prediction of $1000. Multiplying this figure by 365 (days in a year), his forecast for Year 1 is an annual revenue of $365,000. This projection provides Joe with a financial target to aim for and serves as a foundation for his further financial planning. It is worth noting that Joe's sales forecast may need adjustments throughout the year based on actual performance and changes in the market or business environment.

Expenses Budget

To run his coffee shop smoothly, Joe has identified several fixed and variable costs he'll need to budget for. His fixed costs, which are costs that will not change regardless of his coffee shop's sales volume, include rent, which is $2000 per month, salaries for his employees, which total $8000 per month, and utilities like electricity and water, which add up to about $500 per month.

In addition to these fixed costs, Joe also has variable costs to consider. These are costs that fluctuate depending on his sales volume and include the price of coffee beans, milk, sugar, and pastries, which he sells alongside his coffee. After a careful review of all these expenses, Joe estimates that his total annual expenses will be around $145,000. This comprehensive expense budget provides a clearer picture of how much Joe needs to earn in sales to cover his costs and achieve profitability.

Cash Flow Statement

With a clear understanding of his expected sales revenue and expenses, Joe can now proceed to develop a cash flow statement. This statement provides a comprehensive overview of all the cash inflows and outflows within his business. When Joe opened his coffee shop, he invested an initial capital of $50,000. He expects that the monthly cash inflows from sales will be about $30,417 (which is his annual revenue of $365,000 divided by 12), and his monthly cash outflows for expenses will amount to approximately $12,083 (his total annual expenses of $145,000 divided by 12). The cash flow statement gives Joe insights into his business's liquidity. It helps him track when and where his cash is coming from and where it is going. This understanding can assist him in managing his cash resources effectively and ensure he has sufficient cash to meet his business's operational needs and financial obligations.

Income Statement and Balance Sheet

With the figures from his sales forecast, expense budget, and cash flow statement, Joe can prepare his income statement and balance sheet. The income statement, or Profit & Loss (P&L) statement, reveals the profitability of Joe's coffee shop. It calculates the net profit by subtracting the total expenses from total sales revenue. In Joe's case, this means his net profit for Year 1 is expected to be $220,000 ($365,000 in revenue minus $145,000 in expenses).

The balance sheet, on the other hand, provides a snapshot of the coffee shop's financial position at a specific point in time. It includes Joe's initial capital investment of $50,000, his assets like coffee machines, furniture, and inventory, and his liabilities, which might include any loans he took to start the business and accounts payable.

The income statement and balance sheet not only reflect the financial health of Joe's coffee shop but also serve as essential tools for making informed business decisions and strategies. By continually monitoring and updating these statements, Joe can keep his finger on the pulse of his business's financial performance and make necessary adjustments to ensure sustained profitability and growth.

Best Practices in Business Financial Planning

While crafting a business financial plan, consider the following best practices:

• Realistic Projections : Ensure your forecasts are realistic, based on solid data and reasonable assumptions.
• Scenario Planning : Plan for best-case, worst-case, and most likely scenarios. This will help you prepare for different eventualities.
• Regular Reviews : Regularly review and update your plan to reflect changes in business conditions.
• Seek Professional Help : If you are unfamiliar with financial planning, consider seeking assistance from a financial consultant.

The importance of a meticulously prepared business financial plan cannot be overstated. It forms the backbone of any successful business, steering it towards a secure financial future. Creating a solid financial plan requires a blend of careful analysis, precise forecasting, clear and measurable goal setting, prudent budgeting, and efficient cash flow management. The process may seem overwhelming at first, especially for budding entrepreneurs. However, it's crucial to understand that financial planning is not an event, but rather an ongoing process. This process involves constant monitoring, evaluation, and continuous updating of the financial plan as the business grows and market conditions change.

The strategies and best practices outlined in this article offer an invaluable framework for any entrepreneur or business owner embarking on the journey of creating a financial plan. It provides insights into essential elements such as setting clear financial goals, creating a sales forecast, preparing an expense budget, developing a cash flow statement, and preparing income statements and balance sheets. Moreover, the example of Joe and his coffee shop gives a practical, real-world illustration of how these elements come together to form a coherent and effective financial plan. This example demonstrates how a robust financial plan can help manage resources more efficiently, make better-informed decisions, and ultimately lead to financial success.

Remember, every grand journey begins with a single step. In the realm of business, this step is creating a well-crafted, comprehensive, and realistic business financial plan. By following the guidelines and practices suggested in this article, you are laying the foundation for financial stability, profitability, and long-term success for your business. Start your journey today, and let the road to financial success unfold.

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Production Plan in Business Plan: A Comprehensive Guide to Success

Last Updated:  

August 22, 2024

In any business venture, a solid production plan is crucial for success. A production plan serves as a roadmap that outlines the steps, resources, and strategies required to manufacture products or deliver services efficiently. By carefully crafting a production plan within a business plan, entrepreneurs can ensure optimal utilisation of resources, timely delivery, cost efficiency, and customer satisfaction. In this article, we will delve into the intricacies of creating an effective production plan in a business plan , exploring its key components, strategies, and the importance of aligning it with overall business objectives .

Key Takeaways on Production Plans in Business Planning

• A production plan : a detailed outline that guides efficient product manufacturing or service delivery.
• Importance of a production plan : provides a roadmap for operations, optimises resource utilisation, and aligns with customer demand.
• Key components : demand forecasting, capacity planning, inventory management, resource allocation, and quality assurance.
• Strategies : lean manufacturing, JIT inventory, automation and technology integration, supplier relationship management, and continuous improvement.
• Benefits of a well-executed production plan : improved efficiency, reduced costs, enhanced product quality, and increased profitability.

What is a Production Plan?

A production Seamless Searches plan is a detailed outline that specifies the processes, resources, timelines, and strategies required to convert raw materials into finished goods or deliver services. It serves as a blueprint for the entire production cycle, guiding decision-making and resource allocation. The production plan considers factors such as demand forecasting, capacity planning, inventory management, and quality assurance to ensure efficient operations and optimal customer satisfaction.

Why is a Production Plan Important in a Business Plan?

The inclusion of a production plan in a business plan is vital for several reasons. First and foremost, it provides a clear roadmap for business operations, helping entrepreneurs and managers make informed decisions related to production processes. A well-developed production plan ensures that resources are utilised efficiently, minimising wastage and optimising productivity. This is particularly important for any startup platform aiming to streamline its production processes and achieve sustainable growth.

Additionally, a production plan allows businesses to align their production capabilities with customer demand. By forecasting market trends and analysing customer needs, businesses can develop a production plan that caters to current and future demands, thus avoiding overstocking or understocking situations. For those interested in property development, understanding the dynamics of the real estate market can provide valuable insights into aligning production capabilities with demand, ensuring successful projects and investments.

Furthermore, a production plan helps businesses enhance their competitive advantage. By implementing strategies such as lean manufacturing and invoice automation , companies can streamline their production processes, reduce costs, improve product quality, and ultimately outperform competitors.

Key Components of a Production Plan

To create an effective production plan, it is crucial to consider several key components. These components work together to ensure efficient operations and successful fulfilment of customer demands. Let's explore each component in detail.

Demand Forecasting

Demand forecasting is a critical aspect of production planning. By analysing historical data, market trends, and customer behaviour, businesses can predict future demand for their products or services. Accurate demand forecasting allows companies to optimise inventory levels, plan production capacity, and ensure timely delivery to customers.

One approach to demand forecasting is quantitative analysis, which involves analysing historical sales data to identify patterns and make predictions. Another approach is qualitative analysis, which incorporates market research, customer surveys, and expert opinions to gauge demand fluctuations. By combining both methods, businesses can develop a robust demand forecast, minimising the risk of underproduction or overproduction. Utilising a free notion template for demand forecasting can further streamline this process, allowing businesses to organise and analyse both quantitative and qualitative data efficiently in one centralised location.

Capacity Planning

Capacity planning involves determining the optimal production capacity required to meet projected demand. This includes assessing the production capabilities of existing resources, such as machinery, equipment, and labour, and identifying any gaps that need to be addressed. By conducting a thorough capacity analysis, businesses can ensure that their production capacity aligns with customer demand, avoiding bottlenecks or excess capacity.

An effective capacity plan takes into account factors such as production cycle times, labour availability, equipment maintenance, and production lead times. It helps businesses allocate resources efficiently, minimise production delays, and maintain a consistent level of output to meet customer expectations.

Inventory Management

Efficient inventory management is crucial for a successful production plan. It involves balancing the cost of holding inventory with the risk of stockouts. By maintaining optimal inventory levels, businesses can reduce carrying costs while ensuring that sufficient stock is available to fulfil customer orders.

Inventory management techniques, such as the Economic Order Quantity (EOQ) model and Just-in-Time (JIT) inventory system, help businesses strike the right balance between inventory investment and customer demand. These methods consider factors such as order frequency, lead time, and carrying costs to optimise inventory levels and minimise the risk of excess or insufficient stock.

Resource Allocation

Resource allocation plays a pivotal role in a production plan. It involves assigning available resources, such as labour, materials, and equipment, to specific production tasks or projects. Effective resource allocation ensures that resources are utilised optimally, avoiding underutilisation or over-utilisation.

To allocate resources efficiently, businesses must consider factors such as skill requirements, resource availability, project timelines, and cost constraints. By conducting a thorough resource analysis and implementing resource allocation strategies, businesses can streamline production processes, minimise bottlenecks, and maximise productivity .

Quality Assurance

Maintaining high-quality standards is essential for any production plan. Quality assurance involves implementing measures to monitor and control the quality of products or services throughout the production process. By adhering to quality standards and conducting regular inspections, businesses can minimise defects, ensure customer satisfaction, and build a positive brand reputation.

Quality assurance techniques, such as Total Quality Management (TQM) and Six Sigma , help businesses identify and rectify any quality-related issues. These methodologies involve continuous monitoring, process improvement, and employee training to enhance product quality and overall operational efficiency.

In addition to the core components of a production plan, it's also important for businesses to consider the broader aspects of their business strategy, including marketing and advertising. Understanding the costs and returns of different marketing approaches is crucial for comprehensive business planning . For instance, direct response advertising costs can vary significantly, but they offer the advantage of measurable responses from potential customers. This type of advertising can be a valuable strategy for businesses looking to directly engage with their target audience and track the effectiveness of their marketing efforts.

Strategies for Developing an Effective Production Plan

Developing an effective production plan requires implementing various strategies and best practices. By incorporating these strategies into the production planning process, businesses can optimise operations and drive success. Let's explore some key strategies in detail.

Lean Manufacturing

Lean manufacturing is a systematic Seamless Searches approach aimed at eliminating waste and improving efficiency in production processes. It emphasises the concept of continuous improvement and focuses on creating value for the customer while minimising non-value-added activities.

By adopting lean manufacturing principles, such as just-in-time production, standardised work processes, and visual management, businesses can streamline operations, reduce lead times, and eliminate unnecessary costs. Lean manufacturing not only improves productivity but also enhances product quality and customer satisfaction.

Just-in-Time (JIT) Inventory

Just-in-Time (JIT) inventory is a strategy that aims to minimise inventory levels by receiving goods or materials just when they are needed for production. This strategy eliminates the need for excess inventory storage, reducing carrying costs and the risk of obsolete inventory.

By implementing a JIT inventory system, businesses can optimise cash flow, reduce storage space requirements, and improve overall supply chain efficiency. However, it requires robust coordination with suppliers, accurate demand forecasting, and efficient logistics management to ensure timely delivery of materials.

Automation and Technology Integration

Automation and technology integration play a crucial role in modern production planning, as well as mobile app development . By leveraging technology, businesses can streamline processes, enhance productivity, and reduce human error. Automation can be implemented in various aspects of production, including material handling, assembly, testing, and quality control.

Continuous Improvement

Continuous improvement is a fundamental principle of effective production planning. It involves regularly evaluating production processes, identifying areas for improvement, and implementing changes to enhance efficiency and quality.

By fostering a culture of continuous improvement, businesses can drive innovation, optimise resource utilisation, and stay ahead of competitors. Techniques such as Kaizen, Six Sigma, and value stream mapping can help businesses identify inefficiencies, eliminate waste, and streamline production workflows.

Frequently Asked Questions (FAQs)

What is the role of a production plan in business planning.

A1: A production plan plays a crucial role in business planning by providing a roadmap for efficient production processes. It helps align production capabilities with customer demand, optimise resource utilisation, and ensure timely delivery of products or services.

How does a production plan affect overall business profitability?

A2: A well-developed production plan can significantly impact business profitability. By optimising production processes, reducing costs, and enhancing product quality, businesses can improve their profit margins and gain a competitive edge in the market.

What are the common challenges faced in production planning?

A3: Production planning can present various challenges, such as inaccurate demand forecasting, capacity constraints, supply chain disruptions, and quality control issues. Overcoming these challenges requires robust planning, effective communication, and the implementation of appropriate strategies and technologies.

What is the difference between short-term and long-term production planning?

A4: Short-term production planning focuses on immediate production requirements, such as daily or weekly schedules. Long-term production planning, on the other hand, involves strategic decisions related to capacity expansion, technology investments, and market expansion, spanning months or even years.

How can a production plan be adjusted to accommodate changes in demand?

A5: To accommodate changes in demand, businesses can adopt flexible production strategies such as agile manufacturing or dynamic scheduling. These approaches allow for quick adjustments to production levels, resource allocation, and inventory management based on fluctuating customer demand.

In conclusion, a well-crafted production plan is essential for business success. By incorporating a production plan into a comprehensive business plan, entrepreneurs can optimise resource utilisation, meet customer demands, enhance product quality, and drive profitability. Through effective demand forecasting, capacity planning, inventory management, resource allocation, and quality assurance, businesses can streamline production processes and gain a competitive edge in the market.

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11 Succession Planning Best Practices to Follow in 2024

Imagine your CEO announces retirement tomorrow. Panic? Chaos? A well-planned succession strategy ensures a smooth transition, not a mad scramble. Learn how to avoid leadership limbo and future-proof your company.

What is succession planning? 

11 succession planning best practices to follow 

1. start early and plan continuously.

HR tip Conduct regular reviews of your succession plan so that it remains relevant and effective during changes like shifts in business strategy, restructuring, or evolving market demands. Update plans to reflect current priorities, talent landscapes, and future leadership requirements. Encourage managers to discuss career ambitions with team members annually These discussions help align individual goals with organizational needs, identify potential leaders early, and tailor development opportunities to prepare employees for future roles.

2. Develop a formal succession plan

HR tip Create a formal document that acts as a roadmap, detailing the procedures, timelines, and responsibilities involved in preparing for leadership changes. Ensure all stakeholders understand their roles and the expectations placed upon them. Monitor and regularly update the plan to reflect changes in strategy and personnel and communicate changes to ensure transparency.

3. Involve senior leadership

HR tip Get senior leaders to communicate the importance of the succession plan for the organization’s long-term success. This sets a tone that encourages all employees to take the process seriously. By discussing their own career paths, including challenges, successes, and lessons learned, senior leaders can set an example and inspire potential successors. Encourage leaders to take a hands-on approach to identifying and mentoring potential successors. By helping to develop the next generation of leaders through mentorship, they can impart critical knowledge, skills, and organizational values.

4. Identify key positions and skills

HR tip Create competency models for key positions. A systematic approach to talent development and succession planning, enables you to align training and development initiatives with the critical competencies needed for success. Regularly review and update the skills and competencies required. Adopt a proactive approach that ensures your talent pool is prepared to meet future challenges. By analyzing market trends, tech advancements, and strategic shifts, you can adjust competency models accordingly.

5. Assess the current talent

HR tip Use the 9-box grid to assess employee performance and potential. This versatile tool helps in visualizing an employee’s current performance against their potential growth, placing them within a matrix that ranges from low to high on both axes. You can then categorize employees into segments that inform different development strategies, such as targeting specific training for high-potential individuals or creating action plans for those who are skilled but may lack motivation. Conduct regular talent reviews to update employee assessments. Regular talent reviews are essential for keeping employee assessments up-to-date and Annual or biannual reviews provide an opportunity to reevaluate employees’ positions on the 9-box grid, taking into account their recent achievements, improvements, and feedback.

6. Invest in professional development

HR tip Tailor development plans to the individual needs of potential successors. This maximizes the effectiveness of succession planning efforts. Work closely with these employees to identify their developmental needs and career goals and design a plan that addresses these through targeted training, mentorship, and stretch assignments. Offer a mix of on-the-job training, formal courses, and external conferences. Enrich the learning experience for potential successors. Formal courses, whether online or in-person, provide structured learning on specific topics, often leading to certification or advancement in certain skill areas. External conferences expose them to industry trends, networking opportunities, and best practices beyond their immediate organization.

7. Implement mentoring and coaching programs

HR tip Match mentors and mentees based on career aspirations and developmental needs. This ensures that the mentorship is relevant and meaningful to the mentee, addressing the areas where they require growth to prepare for future leadership roles. Consider both parties’ personalities, professional backgrounds, and long-term career goals when making these pairings, as a good match significantly enhances the learning experience. Provide training for mentors on how to support their mentees effectively. Equip mentors with the right tools and knowledge on how to support their mentees. Cover areas such as communication skills, setting goals, providing constructive feedback, and understanding the mentee’s unique developmental needs. Well-equipped mentors make the experience more beneficial for both parties.

8. Incorporate Diversity and Inclusion

HR tip Actively seek diverse candidates for development opportunities. Go beyond traditional talent pools and consider people who may have been overlooked due to unconscious bias or systemic barriers. Broaden your recruitment efforts, use diverse selection panels, and implement targeted leadership development programs for underrepresented groups. Monitor and report on diversity metrics within the succession planning process. By regularly monitoring and reporting on these metrics, you can identify trends, pinpoint areas needing improvement, and adjust strategies accordingly. This data-driven approach ensures accountability and helps to maintain focus on building a diverse leadership pipeline.

9. Use succession planning software

HR tip Evaluate and select software that meets the organization’s needs. Carefully evaluate different software options, considering factors such as functionality, scalability, user-friendliness, and integration capabilities with existing HR systems. The software must accommodate the unique aspects of your organization’s succession planning process, including the ability to track and analyze the competencies and progress of potential successors. Train HR staff and managers on how to use the software. This includes understanding how to input and update information, interpret data, and use the reporting and analytics features. Regular refresher courses and support resources also help users stay updated on new features and best practices.

10. Plan for emergency successions

HR tip Identify interim leaders for critical roles. Work with current leaders to create a list of potential interim successors, based on leadership ability, experience within the organization, and familiarity with the role’s duties. Targeted development and cross-training , ensures they are ready to take on leadership responsibilities at a moment’s notice. Regularly review and update emergency succession plans. Emergency succession plans are living documents. Reassess the list of critical roles and potential interim leaders, and update  procedures based on restructuring, strategy shifts, or lessons learned from past emergencies. Annual reviews mean you can respond swiftly and confidently to unexpected leadership vacancies.

11. Communicate the plan

HR tip Develop an internal communication strategy that includes timelines and milestones. Outline what will be communicated, to whom, how, and when. Include timelines and milestones. Ensure that stakeholders are kept informed at critical points, such as when assessments are taking place, development programs are launched, or changes to the succession plan are made. Provide feedback to employees about their progress and future opportunities. Keep employees motivated and engaged with honest, constructive feedback, focus on areas of improvement and recognise achievements. Discussing future career paths and leadership opportunities helps employees see a clear connection between their development efforts and their career progression.

Succession planning examples

Apple: internal development for leadership continuity, microsoft: a lesson in internal leadership development, key takeaway.

Monique Verduyn

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Succession planning

Learn what succession planning is. Discover how to create or improve your succession planning process with the best practices and downloadable template.

Ivan Andreev

Demand Generation & Capture Strategist, Valamis

February 23, 2022 · updated July 31, 2024

16 minute read

This article is going to explain what succession planning is and how it can be applied to your business.

After reading this guide, you will have a strong idea of creating or improving your succession planning process and the best practices involved.

What is succession planning?

Business succession planning, benefits of succession planning, succession planning process, succession planning best practices, faq about succession planning, succession planning template.

Succession planning is the process whereby you identify new leaders and develop them to take over the role of the incumbent.

For businesses to thrive, it needs to avoid moments of crisis and lack of leadership.

At some point, succession planning will help with such a situation by preparing a candidate for a planned or emergency replacement. This could be because of retirement, a new opportunity, or in the event of death.

Succession planning is your safety net to ensure that business operations can remain smooth. A robust process will help you identify key individuals who could fill leadership positions.

In the best-case scenario, you will be given advance notice when someone is going to leave. A succession plan prepares you for the worst-case scenario and no notice.

At the same time, an effective succession planning strategy will avoid any questions of succession where leadership positions are concerned.

In the monarchy, this is often resolved through the order of succession. A well-understood model that passes the office to the nearest descendant. This model is also common with family-run businesses that intend to leave the business to their children or next of kin.

It can help you navigate crises and leadership transitions with ease.

In business, succession planning plays a vital role in identifying candidates to take on more challenging roles. When an important postholder departs they leave behind a void that can disrupt the company.

No matter the size of your business, a succession plan is a key to having a smooth transition.

Large companies such as Pepsi , Microsoft , and General Electric have well-known succession plans for executive talent.

For large corporations, it will typically fall to the CEO and the board of directors to oversee the succession plans. They will evaluate employees to identify leadership qualities and provide training for those in consideration.

Often the succession plan will look internally for candidates to take over positions. However, some companies may look to external candidates and may even employ the use of headhunters.

Smaller-scale companies may not need a comprehensive succession plan compared to large businesses. However, there will still be a need to identify someone to take over in the event of an emergency.

Therefore it is wise to train potential successors so they are prepared to step up if the need arises.

Types of succession plans

There are two types of succession plans that should be considered. This will give your business something to fall back on in the case of an emergency.

1. Long-term succession plan

The first type of succession plan you should consider is your long-term succession plan. This is the plan that you will more or less stick to as a standard for key positions.

A succession plan of this nature can be reevaluated and changed as the company grows. For large companies, this would be the plan that outlines the details of succession for all key positions.

2. Emergency succession plan

A secondary emergency succession plan can also be created, where appropriate, to be deployed in the event of an emergency.

This type of plan may involve more temporary measures but is intended to keep operations running smoothly.

This could see other senior members of staff take on extra responsibilities while a replacement is sought.

Many small and medium businesses do not have a succession plan. Of those that do, some of them have only informal plans.

This can be a risk for your business as there could be unforeseen incidents that could occur such as death. It is worth creating a formal, written succession plan that is developed and easily accessible.

Here are some of the benefits for businesses of any size to create a succession plan:

1. Candidates ready to start

When an upcoming promotion, retirement, or departure is approaching you will have the next generation of leaders ready to go.

Thanks to your succession plan the replacement will already have the skills required to take over the role.

2. Encourages managers to develop junior employees

Your succession plan can help your managers to start developing lower-level employees.

The plan helps to define clear progression routes through the company so managers can share appropriate training and information with junior staff.

Managers will also be able to start training their replacement when promotions are approaching.

3. It leads to higher job satisfaction

Employees report higher job satisfaction when there is a succession plan at their company. This is because it helps to define routes to progressions and lowers job insecurity.

A succession plan can help employees understand what they need to do to achieve a promotion. It can help with goal-setting and giving employees a sense of direction at work.

4. Helps to track progress

Succession planning can help your managers to track employee progress through performance reviews.

Internal opportunities can also be quickly filled with knowledgeable employees who have been upskilled and crossed trained.

5. Keeps shareholders confident

Whenever a high-ranking postholder leaves the organization it can leave shareholders feeling uneasy.

In some cases, they may look to sell their shares. A good succession plan can help keep investors on board.

For positions like CEO or CFO, the board may have had some input into the choice of successor. This will give the shareholders confidence in the company and the new postholder.

6. Cultivate and maintain company loyalty

Having a strong culture of promoting from within can lead to increased company loyalty.

You can attract talented employees who will stay with you for a long time. This helps them to have a strong understanding of the businesses, morals, and expectations.

Employees are more likely to stick around for the long term if there are defined advancement opportunities.

Instead of an informal plan, it’s a good idea to make a comprehensive document that outlines how succession should work.

Small and family businesses may only need a limited plan that outlines succession for a single person.

Larger corporations may need a comprehensive document that starts with the hiring process and works its way through the ranks and details different leadership positions.

The fundamentals of your succession plan will remain the same which is what we’re going to look at now.

It’s also worth pointing out that this document can be revised and amended whenever it is necessary.

1. Determine the scope

You will need to figure out how comprehensive you want your succession planning to be.

A small business might only need to find a replacement for ownership. Medium and large businesses may only want to consider the succession plan for their C-suite of employees.

It may also be the case you want a succession plan that covers every eventuality from store manager to distribution to CEO.

Ask yourself the following questions to decide what is best for your business:

• Do you only need a plan that covers senior management?
• Do you want a succession plan that covers the entire organization?
• Are there any vulnerabilities in your business? Such as having a division with a higher amount of employees nearing retirement. Are you prepared for that?
• Should performance reviews be used to help identify potential candidates?
• Should the talent acquisition process be a part of your succession plan?

It’s important to understand what your specific needs are as well as the needs of the business.

The size and type of your business can help to inform some of your decisions but ultimately every business will be different.

2. Identify key positions and skills

First, you have to identify the key roles in your organization that will be good to secure.

It could be the CEO, CFO, CCO, CHRO, and different heads of departments.

Second, you might have some specific specialists that are unique to the industry or your business, e.g. it might be some highly skilled engineer, programmer, scientist, etc.

Consider the following questions to identify key positions and the skills needed for that post:

• How does this position impact the company?
• If this position became vacant, how would that affect the company?
• Are there some big risks if this position became vacant?
• What skills (both hard and soft) are needed for this specific role?

The objective is to figure out how crucial the position is. If the company would be severely affected by a vacated position then this is one that should be considered within your succession plan.

You will also need to understand what specific attributes are needed for the role. That way you can build your training and development around nurturing those key skills.

3. Identify potential candidates

Perhaps the most crucial stage is finding the employees that might be suited to a tougher challenge .

You could ask the current postholder for help determining who could step up in their absence.

It’s also worth considering that the right person for the job isn’t necessarily the next in line. Candidates could be sidestepped in the role or there could be other promising candidates in the business.

You may wish to make hiring a part of the plan and therefore can use interviews to vet potential recruits for career prospects.

Try to answer the next questions:

• Who are the strongest candidates to step into this role?
• What skills do they possess that could benefit their new office?
• What skills are the candidates lacking?
• Does this person have the appetite for more responsibility?
• What training will they need to succeed?

It’s important to identify people who want more responsibility. Your top choice maybe someone who is happy in their current role and not looking to change.

This is something that can be gauged during annual reviews or in meetings about their professional goals.

4. Speak to the candidates

It would be wise to speak with the people you are considering.

This will give you a clear answer if they would be interested in the role.

Don’t make any promises but explain that they are being considered for leadership.

Explain that nothing is guaranteed as there are plenty of moving factors to consider. This includes the current postholder, the company, and the candidates.

However, you can gauge their interest and it may help to encourage high-performing individuals to remain loyal to the company.

5. Work on professional development

Leadership development is worth investing in particularly for employees you have identified for succession into key roles.

There are a variety of ways to develop potential successors and help them to develop leadership skills.

You can create a leadership development plan to ensure candidates have the right skills and are a good fit for leading positions. Employees being groomed for leadership roles can be developed in several ways .

You need to test your employees to make sure they can meet the demands of the increased responsibilities.

Some of the ways this can be achieved are through:

Connect the candidates with business leaders in your company. They can help to develop the skills of succession candidates and even share knowledge that might not be immediately obvious.

You can send prospects on courses to help develop their skills. These could be in-house courses or ones run through independent third parties.

Task forces

Task forces and project management is a great way to test your candidates. This will give them the opportunity to lead a team and test how well they cope under pressure.

When you think about development consider the following questions:

• What is the best way to upskill?
• What resources are required and available?
• Are there some additional skills needed?

The focus should be on improving a candidate’s interpersonal abilities and communication skills that are important in a leading position.

You will also want to give them the opportunity to learn and develop the necessary skills required to do the specific job.

6. Trial and error

There should be ample opportunity to give your succession plan a trial run with the candidates you are considering. For example, if the postholder is away on holiday or off sick for an extended period you can use this as an opportunity to try someone in the role.

The benefit here is twofold, the candidate will get a feel for the position and appreciate the opportunity. While you can assess whether they are the right candidate for the position.

Note: Such tests can affect the team so pay close attention to this . This is especially true for external candidates and people from different teams. Not everybody will like it, unless the candidate is a strong leader from the inside of the team.

This is what you need to consider:

• How does the employee interact with others?
• Have they kept the department running smoothly?
• How do they handle issues that arise?
• How do they react to stressful situations and conflicts?
• How much help do they need in the role?

You want to see them step up and take control of the position. This will help identify if there is any specific training they need to take the role full-time.

You can gauge whether someone is wrong for the position. This may come down to their interpersonal skills or ability to deal with new challenges.

7. Refine and redefine

Your succession plan is something that can be developed over time.

It may be that what was working years ago isn’t quite the same now.

You may need to adjust the succession plan to adapt to a changing business landscape. As the business grows you may need to redefine what is included in your succession plan.

It would be prudent to start with the most important roles in the business. After all, you can’t totally predict when a key position will become vacant.

Once you have those key positions locked down you can start to expand the scope of your succession plan.

1. Start from key roles

You should start with the most important roles first.

Which of the positions will have the greatest effect on your business if the postholder doesn’t turn up tomorrow?

Roles at an executive level are going to be the most disruptive ones. From there work out the specific skills and knowledge required for the role. This will help you to create your plan and identify potential successors.

Once the most pressing roles are covered you can look at what other roles are important to include.

2. Talk to your employees

Your succession plan will affect people and may make some people feel nervous.

It’s important to explain the scope of the succession plan and why certain roles are included in it.

You may only look to include executive positions or your plan may include managers and supervisory staff as well.

By giving a clearly defined scope you can avoid members of staff second-guessing their position.

3. Collaboration between management and HR

This is a process that should be driven by the business leaders with support from HR where necessary.

It is not strictly an HR process and therefore senior leadership should be communicated with regarding the succession plan.

Gain insights, input, and information from across the senior positions to help the succession plan run smoothly. Interviewing the post holders about the wants and needs of their job can provide crucial information.

4. Forecast your business needs

You should have an emergency succession plan in place that can deal with the untimely vacancy of a position.

Alongside this, you can create a detailed forecast and a longer-term plan. This is necessary to address things like upcoming retirement and promotions.

You will also need to consider how quickly the business can mobilize to fill this position.

A strong succession plan will understand how it will impact the business in 6 months, 1 year, and 5 years.

5. Create a pipeline of talent

Create a pipeline of talent so you have individuals ready to take up new challenges as they arrive.

A pipeline of this kind is essential for finding a talented successor but it’s also a good idea to help fill newly created positions. New recruits can be included in your pipeline of talent.

You can learn about this in our talent acquisition guide.

Even if you don’t have any open positions currently, you can still start cultivating a pool of talented individuals.

6. Annual talent reviews

Your succession plan is something that should be continually developed.

This includes reviewing the candidates on an annual basis or more. People may have moved on or into new positions within your company. Promising candidates may no longer be performing at the standard you would like.

Take a look at your succession plan every year and adapt and change things where it is necessary.

7. Build the learning culture inside your organization

It will help you nurture and grow potential candidates as well as new talents.

When you have identified the individuals that are being considered for senior positions you will need to develop their skills.

You can work with the candidates and they can lead their own individual development plan.

This ensures that their progress is actively monitored and they can take ownership of the process.

Managers should be on hand to provide guidance, resources, and provide timely reviews.

Why is succession planning important?

Succession plans make your business disaster-proof. They provide a concrete plan for filling key roles and help to avoid times of uncertainty. It can be reassuring for investors to know that there is a carefully considered plan in place.

How to do succession planning?

Succession planning should be conducted by business leaders with support from the HR teams. All affected individuals need to be involved in the process. Start with the end goal to identify what you need to achieve. Each business will have different needs so consider which positions will have the biggest effect on operations.

What is business succession planning?

Business succession planning is the process whereby you identify candidates to be groomed for senior positions. Specifically, when the incumbent leaves the role, this could be for a promotion, retirement, or an untimely death. Your business succession plan is in place to facilitate a transfer of power and keep your business sailing smoothly.

What is the correct order of the succession planning process?

• Identify which positions need to be included
• What specific skills are required for those roles?
• Identify people who could be a good fit
• Start grooming them for succession
• Review your succession plan and candidates annually

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Operational planning: 5 steps to create a better business operational plan

Learn how to conduct operational planning to enhance collaboration, streamline workflows, and unlock peak productivity in all your company’s teams.

Webflow Enterprise gives your teams the power to build, ship, and manage sites collaboratively at scale.

Operational planning enhances collaboration and streamlines workflows to unlock peak efficiency.

Transforming a strategic vision into business success demands meticulous planning. It requires navigating unexpected obstacles, coordinating team activities with long-term goals, and implementing practical steps to realize organizational objectives.

Organizational planning plays a pivotal role in this context by translating high-level strategies into actionable day-to-day tasks.

But an operational plan is more than a structured to-do list — it’s a comprehensive framework that outlines roles, responsibilities, and timelines. By breaking down grand strategies into executable actions, operational planning ensures cohesive teamwork and transforms ambiguous business strategies into achievable realities.

What’s operational planning?

Operational planning is how companies organize day-to-day tasks to align with broader strategic goals. It’s a road map guiding teams through operational decisions about daily operations, ensuring every task contributes to the company’s long-term and high-level objectives. This typically involves setting short-term objectives, defining key activities, and establishing clear timelines.

In practice, operational planning often blends traditional and innovative methods to maximize efficiency. Conventional strategies like Gantt charts and flowcharts help leaders visualize data , tasks, and timelines to make complex projects more manageable. And digital tools like enterprise project management software introduce automation, real-time collaboration, and data analytics into the mix. These platforms enable agile plan adjustments and offer insights through predictive analytics.

By integrating these mixed methodologies, operational planning helps enterprises build a system that’s efficient and responsive to evolving business needs. It bridges the gap between meticulous organization and the agility needed in a fast-paced business environment.

Benefits of operational planning

Operational planning offers a structured approach to decision-making, but its advantages extend beyond planning. Here’s why it’s a crucial tool for achieving organizational goals.

Clarifies goals

Operational planning turns abstract ideas into concrete objectives. It encourages setting explicit goals with definitive timelines. This clarity benefits leadership and the entire team, ensuring everyone understands what needs doing, who’s doing it, and by when.

Enhances productivity

An operational plan enhances productivity by establishing timelines, outlining objectives, and allocating resources. This structure helps team members prioritize their work and manage their time efficiently because they have clear deadlines to guide them.

By defining precise objectives, the plan ensures every team member understands their specific tasks and expected outcomes, preventing unnecessary work and deviations from the plan. And knowing what resources are available helps team members prepare realistically for their taskwork.

Improves efficiency

A well-crafted operational plan boosts efficiency by optimizing workflows and streamlining organizational processes . By mapping out immediate and long-term objectives, the plan establishes a clear blueprint for task execution. As team members better understand their roles, task sequence, and the rationale behind each, they can execute them more seamlessly. This clarity and structure are also invaluable for onboarding new team members and allow them to integrate and understand the workflow with less friction.

Strategic planning vs. operational planning

Both plan types are distinct yet essential components of an organization’s overall planning process. Let’s break down the primary differences:

• A strategic plan defines your company’s “what,” outlines your business’s direction, and sets broad, long-term objectives. It’s a high-level overview that articulates your mission statement, establishes key business objectives, and outlines strategies for achieving them. This plan typically spans several years into the future and aligns the company’s efforts with its overarching vision.
• An operational plan focuses on the “how” by detailing how to execute the strategies and goals laid out in the strategic plan. This is where you get into the specifics — setting milestones, crafting a detailed road map, and establishing short-term, incremental goals that steer your company toward achieving strategic objectives. And at this point, you’ll focus on more immediate factors, like dealing with daily management and task implementation, that are necessary to achieve strategic organizational goals.

Types of operational plans

Departmental goals and needs vary significantly, and tailored operational plans ensure you optimally manage each area. While a sales department might need a plan focused on customer engagement and retention, an IT department might emphasize technology upgrades and cybersecurity . Combining various plan types — like a couple of those that follow — ensures optimal management and effectiveness in each area, aligning departmental activities with broader objectives.

Project operation plans

Project operation plans are indispensable documents for breaking projects into actionable milestones and assigning teams to relevant tasks. A well-developed project plan organizes tasks and anticipates resource requirements such as personnel, infrastructure, and time. By identifying these requirements early on, project operation plans provide planning foresight that helps avoid resource shortages and last-minute scrambles to ensure projects progress smoothly and stay on track.

Say you’re designing a website . Your project operation plan will outline key steps, such as user research , wireframing , user testing , and launch. Each step would have assigned teams, deadlines, and specific objectives, like establishing focus groups by a certain date and finalizing prototypes. The project manager would monitor progress to ensure resource availability and timeline adherence.

Enterprise operation plans

Enterprise operation plans translate broader strategic goals into smaller, manageable milestones. They involve assigning responsibility for these milestones to department directors to ensure accountability for each plan segment.

When creating an enterprise operational plan, it’s vital to identify resource gaps, dependencies, and other potential obstacles to ensure seamless execution. This lets you set realistic, achievable milestones and achieve smooth interdepartmental coordination. Involving directors from the start is also crucial because their insights can reveal critical aspects you might otherwise overlook.

Consider a web design agency planning to expand their service offerings to include mobile app development over the next year. The enterprise operational plan might include milestones such as hiring app developers, training current staff in responsive mobile design , and marketing these new services to potential leads. You might also ask the development head to oversee recruitment and training and involve the marketing director in developing strategies to promote the new services.

IT operation plans

IT departments confront unique challenges due to rapid cybersecurity threats and their critical role in every business sector. Unlike other departments focusing on sales and marketing, IT departments must ensure the organization’s technological structure is robust, secure, and current.

IT operation plans typically outline how the department will adapt to business changes, like scaling up for new hires, migrating from a legacy system to a new one, and safeguarding the organization against evolving cybersecurity threats.

If you’re preparing for a major server infrastructure upgrade, for instance, an IT operation plan will outline steps like evaluating current server and hosting capacities, selecting new hardware and infrastructure, and scheduling website migration to new servers. The plan would include specific timelines — such as completing server evaluations by the end of the first quarter and starting the migration in the second quarter — to ensure minimal downtime and a smooth transition for all hosted websites.

Discover how the right CMS can allow teams to efficiently scale rich, complex content – all without writing code.

Key elements of an operational plan

No matter the type you’re creating, most operational plans include the following core traits.

Operational plans should be clear and to the point. While comprehensive coverage is important, elaborating too much risks misinterpretation and becoming bogged down in the details. Focus on concise, direct explanations and allow the details to unfold during project execution.

Team buy-in is essential for success. Instead of leaving the executive team to dictate the plan exclusively, involve team members in its creation. A collaborative approach helps garner buy-in and fosters feelings of ownership and responsibility toward the plan’s objectives. This involvement translates to increased motivation and commitment because team members feel more likely to invest effort in a plan they helped shape.

Consistency

Consistency in operational plans is crucial for their effectiveness and for establishing organizational trust. It involves applying the same standards and procedures uniformly across all departments and teams. By consistently applying rules and policies, you ensure every organizational element operates under the same guidelines, enhancing fairness and reducing confusion. Consistent execution of your operational plan also streamlines progress and success tracking because the criteria and methods used for each remain uniform.

Specify the processes and methodologies each department should use. If the design team uses an agile, iterative process , for instance, implement similar practices in other departments like IT. This standardization enables smoother collaboration and operational harmony.

Key performance indicators

Every operational plan needs well-defined key performance indicators (KPIs) from the outset. These should include:

• Leading indicators provide early insights into your strategy’s effectiveness by signaling shifts and trends ahead of their full realization. By monitoring these indicators, you can gauge your strategy’s immediate impact and proactively adjust your approach. Indicator examples include customer satisfaction levels, changes in market share, and fluctuations in sales figures.
• Lagging indicators reflect the outcomes of your operational efforts by providing historical data on your plan’s efficacy after execution. Key lagging indicators include metrics like the time taken to complete projects, support ticket volumes, and total expenses incurred. Analyzing these metrics also helps identify improvement areas, like optimizing resource allocation, enhancing customer support processes, and streamlining operational workflows.

Constraints

Acknowledge any assumptions and constraints within your plan, such as technological limitations, tight deadlines, and regulatory requirements. Being upfront about these factors is essential for setting realistic expectations and guiding effective task execution. And it ensures everyone involved understands the framework they’re operating in.

Say you’re building an agency website in the European Union (EU). A critical constraint would be compliance with data protection regulations like the General Data Protection Regulation (GDPR). You must keep this constraint in mind as you develop your operational plan because it affects the technology and processes used for data handling and shapes your website’s design and functionality. For instance, you’ll likely need to integrate clear consent mechanisms for data collection, prominent user data management tools into the website’s layout, and GDPR-compliant technologies for data processing and storage.

The 5 steps of the operational planning process

Enterprises develop operational plans through five strategic steps, each essential for shaping an actionable and effective strategy. Let’s explore what this planning process looks like.

1. Set goals

Establish specific, immediate business goals that align with your strategic plan. This might include launching a redesigned website, increasing online sales by a specific percentage, or reducing digital marketing expenses.

Make these goals ambitious yet adaptable, allowing for flexible responses to unexpected challenges. This step lays the foundation for your operational strategy and aligns every subsequent action toward these well-defined objectives.

2. Allocate resources

After establishing your goals, evaluate your capacity to achieve them. Analyze your current resources and identify what additional expertise, technology, and budget you require. This step isn’t just about highlighting what’s missing — it’s about strategizing how to scale your business to accommodate these needs.

3. Define KPIs

Select KPIs that align closely with your operational goals and ensure they reflect key aspects of your strategy. These KPIs should include leading indicators, like website traffic and user engagement rates for predictive analytics, and lagging indicators, such as satisfaction scores post-launch, to evaluate past performance. Consistently apply these KPIs throughout your project to monitor progress and keep the team focused on core objectives.

Consider using digital analytic platforms like Google Analytics to track KPIs. These tools offer detailed insights into traffic and user behavior. And you can set up dashboards to visually represent these metrics to help spot trends and patterns without combing through data.

Suppose you notice rising bounce rates on a specific webpage — this might indicate user disinterest or navigational issues. In response, you might pivot to revise the page’s copy, restructure its visual hierarchy , or simplify the navigation structure to make it more engaging and user-friendly.

4. Prescribe processes

Develop clear and detailed plans for how your teams should execute tasks. This clarity guides them through each stage, reducing confusion, ensuring consistency, and enhancing productivity.

To communicate these procedures to your team, use tools like flowcharts. They simplify and clarify each operational plan phase and help ensure everyone understands their responsibilities.

For large-scale projects, consider using project management software like Asana, Trello, or Jira. These platforms offer features like task assignment, deadline tracking, and real-time communication, and they provide a centralized platform for monitoring progress and maintaining team alignment.

5. Determine milestones

Create a road map that outlines clear, measurable goals and specific objectives. This map transforms your operational plan into achievable targets, helping teams visualize where they’re headed and the benchmarks they need to hit. Host regular meetings when outlining your milestones — this consistent evaluation ensures everyone moves forward in sync, maintaining the necessary momentum to achieve the plan’s goals.

In a web development project, for example, these evaluations might reveal if certain phases, like design or development, have too few or surplus resources. Identifying these imbalances lets you efficiently reallocate resources to ensure each department has what it needs to meet its milestones effectively and on schedule.

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How to create an effective business continuity plan

A business continuity plan outlines procedures and instructions an organization must follow in the face of disaster, whether fire, flood, or cyberattack. here’s how to create a plan that gives your business the best chance of surviving such an event..

The tumultuous events of the past several years have impacted practically every business. And with the number of extreme weather events, cyberattacks, and geopolitical conflicts continuing to rise, business leaders are bracing for the possibility of increasingly more frequent impactful incidents their organizations will need to respond to.

According to PwC’s 2023 Global Crisis and Resilience Survey , 96% of 1,812 business leaders said their organizations had experienced disruption in the past two years and 76% said their most serious disruption had a medium to high impact on operations.

It’s little wonder then that 89% of executives list resilience as one of their most important strategic priorities.

Yet at the same time, only 70% of respondents said they were confident in their organization’s ability to respond to disruptions, with PwC noting that its research shows that too many organizations “are lacking the foundational elements of resilience they need to be successful.”

A solid business continuity plan is one of those foundational elements.

“Every business should have the mindset that they will face a disaster, and every business needs a plan to address the different potential scenarios,” says Goh Ser Yoong, head of compliance at Advance.AI and a member of the Emerging Trends Working Group at the professional governance association ISACA.

A business continuity plan gives the organization the best shot at successfully navigating a disaster by providing ready-made directions on who should do what tasks in what order to keep the business viable.

Without such as a plan, the organization will take longer than necessary to recover from an event or incident — or may never recover at all.

What is a business continuity plan?

A business continuity plan (BCP) is a strategic playbook created to help an organization maintain or quickly resume business functions in the face of disruption, whether that disruption is caused by a natural disaster, civic unrest, cyberattack, or any other threat to business operations.

A business continuity plan outlines the procedures and instructions that the organization must follow during such an event to minimize downtime, covering business processes, assets, human resources, business partners, and more.

A business continuity plan is not the same as a disaster recovery plan , which focuses on restoring IT infrastructure and operations after a crisis. Still, a disaster recovery plan is part of the overall strategy to ensure business continuity, and the business continuity plan should inform the action items detailed in an organization’s disaster recovery plan. The two are tightly coupled, which is why they often are considered together and abbreviated as BCDR.

Why business continuity planning matters

Whether you operate a small business or a large corporation, it’s vital to retain and increase your customer base. There’s no better test of your capability to do so than right after an adverse event.

Because restoring IT is critical for most companies, numerous disaster recovery solutions are available. You can rely on IT to implement those solutions. But what about the rest of your business functions? Your company’s future depends on your people and processes. Being able to handle any incident effectively can have a positive effect on your company’s reputation and market value, and it can increase customer confidence.

Moreover, there are increasing consumer and regulatory expectations for both enterprise security and continuity today. Consequently, organizations must prioritize continuity planning to prevent not only business losses, but financial, legal, reputational, and regulatory consequences.

For example, the risk of having an organization’s “license to operate” withdrawn by a regulator or having conditions applied (retrospectively or prospectively) can adversely affect market value and consumer confidence.

Building (and updating) a business continuity plan

Whether building the organization’s first business continuity plan or updating an existing one, the process involves multiple essential steps.

Assess business processes for criticality and vulnerability: Business continuity planning “starts with understanding what’s most important to the business,” says Joe Nocera, principle in the cyber risk and regulatory practice at PwC, a professional services firm.

So the first step in building your business continuity plan is assessing your business processes to determine which are the most critical; which are the most vulnerable and to what type of events; and what are the potential losses if those processes go down for a day, a few days, or a week.

“This step essentially determines what you are trying to protect and what you are trying to keep up for systems,” says Todd Renner, senior managing director in the cybersecurity practice at FTI Consulting.

This assessment is more demanding than ever before because of the complexity of today’s hybrid workplace, the modern IT environment, and the reliance on business partners and third-party providers to perform or support critical processes.

Given that complexity, Goh says a thorough assessment requires an inventory of not only key processes but also the supporting components — including the IT systems, networks, people, and outside vendors — as well as the risks to those components.

This is essentially a business impact analysis.

Determine your organization’s RTO and RPO: The next step in building a business continuity plan is determining the organization’s recovery time objective (RTO), which is the target amount of time between point of failure and the resumption of operations, and the recovery point objective (RPO), which is the maximum amount of data loss an organization can withstand.

Each organization has its own RTO and RPO based on the nature of its business, industry, regulatory requirements, and other operational factors. Moreover, different parts of a business can have different RTOs and RPOs, which executives need to establish, Nocera says.

“When you meet with individual aspects of the business, everyone says everything [they do] is important; no one wants to say their part of the business is less critical, but in reality you have to have those challenging conversations and determinations about what is actually critical to the business and to business continuity,” he adds.

Detail the steps, roles, and responsibilities for continuity: Once that is done, business leaders should use the RTO and the RPO, along with the business impact analysis, to determine the specific tasks that need to happen, by whom, and in what order to ensure business continuity.

“It’s taking the key components of your analysis and designing a plan that outlines roles and responsibilities, about who does what. It gets into the nitty-gritty on how you’re going to keep the company up and running,” Renner explains.

One common business continuity planning tool is a checklist that includes supplies and equipment, the location of data backups and backup sites, where the plan is available and who should have it, and contact information for emergency responders, key personnel, and backup site providers.

Although the list of possible scenarios that could impact business operations can seem extensive, Goh says business leaders don’t have to compile an exhaustive list of potential incidents. Rather, they should compile a list that includes likely incidents as well as representative ones so that they can create responses that have a higher likelihood of ensuring continuity even when faced with an unimagined disaster.

“So even if it’s an unexpected event, they can pull those building blocks from the plan and apply them to the unique crisis they’re facing,” Nocera says.

The importance of testing the business continuity plan

Devising a business continuity plan is not enough to ensure preparedness; testing and practicing are other critical components.

Renner says testing and practicing offer a few important benefits.

First, they show whether or how well a plan will work.

Testing and practicing help prepare all stakeholders for an actual incident, helping them build the muscle memory needed to respond as quickly and as confidently as possible during a crisis.

They also help identify gaps in the devised plan. As Renner says: “Every tabletop exercise that I’ve ever done has been an eye-opener for everyone involved.”

Additionally, they help identify where there may be misalignment of objectives. For example, executives may have deprioritized the importance of restoring certain IT systems only to realize during a drill that those are essential for supporting critical processes.

Types and timing of tests

Many organizations test a business continuity plan two to four times a year. Experts say the frequency of tests, as well as reviews and updates, depends on the organization itself — its industry, its speed of innovation and transformation, the amount of turnover of key personnel, the number of business processes, and so on.

Common tests include tabletop exercises , structured walk-throughs, and simulations. Test teams are usually composed of the recovery coordinator and members from each functional unit.

A tabletop exercise usually occurs in a conference room with the team poring over the plan, looking for gaps and ensuring that all business units are represented therein.

In a structured walk-through, each team member walks through his or her components of the plan in detail to identify weaknesses. Often, the team works through the test with a specific disaster in mind. Some organizations incorporate drills and disaster role-playing into the structured walk-through. Any weaknesses should be corrected and an updated plan distributed to all pertinent staff.

Some experts also advise a full emergency evacuation drill at least once a year.

Meanwhile, disaster simulation testing — which can be quite involved — should still be performed annually. For this test, create an environment that simulates an actual disaster, with all the equipment, supplies and personnel (including business partners and vendors) who would be needed. The purpose of a simulation is to determine whether the organization and its staff can carry out critical business functions during an actual event.

During each phase of business continuity plan testing, include some new employees on the test team. “Fresh eyes” might detect gaps or lapses of information that experienced team members could overlook.

Reviewing and updating the business continuity plan should likewise happen on an ongoing basis.

“It should be a living document. It shouldn’t be shelved. It shouldn’t be just a check-the-box exercise,” Renner says.

Otherwise, plans go stale and are of no use when needed.

Bring key personnel together at least annually to review the plan and discuss any areas that must be modified.

Prior to the review, solicit feedback from staff to incorporate into the plan. Ask all departments or business units to review the plan, including branch locations or other remote units.

Furthermore, a strong business continuity function calls for reviewing the organization’s response in the event of an actual event. This allows executives and their teams to identify what the organization did well and where it needs to improve.

How to ensure business continuity plan support, awareness

One way to ensure your plan is not successful is to adopt a casual attitude toward its importance. Every business continuity plan must be supported from the top down. That means senior management must be represented when creating and updating the plan; no one can delegate that responsibility to subordinates. In addition, the plan is likely to remain fresh and viable if senior management makes it a priority by dedicating time for adequate review and testing.

Management is also key to promoting user awareness. If employees don’t know about the plan, how will they be able to react appropriately when every minute counts?

Although plan distribution and training can be conducted by business unit managers or HR staff, have someone from the top kick off training and punctuate its significance. It’ll have a greater impact on all employees, giving the plan more credibility and urgency.

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• Creating a Small Business Financial Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 02, 2023

Are You Retirement Ready?

Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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How To Write a Strategic Plan for Your Business

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Strategic planning forms the foundation of effective strategy management. It's the crucial first step that sets the direction for your entire business, regardless of its size or industry. A well-crafted strategic plan does more than outline goals—it provides a roadmap for achieving them, aligning your team's efforts, and adapting to change. Whether you're steering a multinational corporation or managing a neighborhood café, mastering the art of strategic planning can significantly impact your business's trajectory. Let's explore how strategic planning initiates the strategic management process and lays the groundwork for long-term success.

What are the seven elements of a strategic plan?

A comprehensive strategic plan typically consists of seven key elements that work together to create a cohesive roadmap for your business. Let's explore each of these elements:

Vision 

Your vision statement articulates what your organization aspires to achieve in the future. It's your long-term goal to provide a clear picture of where you want your business to be. A strong vision statement is inspirational and guides your strategic decision-making.  

The mission statement is the driving force behind why your company exists. It defines who you serve, how you create value, and what sets you apart. A well-crafted mission statement should be concise, memorable, and aligned with your vision.

Values 

Your core values are the fundamental beliefs that guide your company's behavior and decision-making process. They shape your organizational culture and influence how you interact with customers, employees, and stakeholders.

Goals 

Goals are the measurable objectives that align with your business mission, vision, and values. These are typically your long-term ambitions, often set for a 3-5 year timeframe. They provide direction and focus for your entire organization.

Your strategy is the long-term plan for achieving your objectives. It's based on both internal and external factors, often informed by a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). Your strategy maps out how you'll leverage your strengths, address weaknesses, capitalize on opportunities, and mitigate threats.

The approach outlines how you'll execute your strategy and achieve your objectives. It involves defining specific actions and initiatives. These are often your short-term objectives, breaking down long-term goals into smaller, measurable milestones to track progress and maintain momentum.

Tactics are the granular, short-term actions, programs, and activities that support your approach. They are the detailed steps and specific tasks that, when executed, help you achieve your objectives and, ultimately, your long-term goals.

By incorporating these seven elements into your strategic plan, you create a comprehensive framework that bridges the gap between your current state and your desired future. This strategic roadmap not only defines where you want to go but also outlines how you'll get there, ensuring that every aspect of your business is aligned towards achieving your vision.

What is an example of a strategic plan?

A strategic plan is your business's GPS, guiding you from where you are to where you want to be. It's a comprehensive document that outlines your goals, strategies, and the steps needed to achieve them. 

Let's look at a real-world example to see what a strategic plan could look like in practice:

Imagine a mid-sized tech company aiming to become a market leader in cloud computing solutions. 

Their strategic plan might include:

• Mission : To revolutionize business efficiency through innovative cloud solutions
• Vision: To be the go-to cloud service provider for small and medium enterprises by 2026
• Core values: Innovation, customer-centricity, collaboration
• SWOT analysis: Identifying strengths (cutting-edge technology), weaknesses (limited market presence), opportunities (growing demand for cloud services), and threats (intense competition)
• Long-term goals : Achieve 25% market share within five years
• Short-term objectives: Increase customer base by 50% in the next 12 months
• Action plans: Launch a targeted marketing campaign, develop new product features, and expand the sales team

This example demonstrates how a strategic plan provides a clear roadmap for achieving business objectives.

Specific examples of strategic plans for various sectors

Different sectors may emphasize different aspects of strategic planning . For instance:

• Healthcare: Focus on patient outcomes, technology integration, and regulatory compliance
• Education: Prioritize student achievement, faculty development, and funding strategies
• Non-profit: Emphasize mission alignment, donor engagement, and program effectiveness

Remember, the key is to adapt your strategic plan to your unique context and needs.

How do you make a strategic plan for a small business?

Strategic planning is essential for all business sizes, not just corporate giants. Small businesses, with their limited resources, can greatly benefit from a well-structured strategic plan. By prioritizing initiatives and allocating resources wisely, a strategic plan helps avoid costly mistakes and maximizes return on investment. It allows business owners to focus on impactful activities, adapt quickly to market changes, and ensure every effort contributes to long-term goals. 

Even a simplified version of the seven strategic planning elements can provide a solid foundation for growth. The key is creating a plan that's both comprehensive and flexible. In the resource-constrained world of small business, a well-crafted strategic plan ensures that every resource is channeled effectively, promoting smart, strategic growth rather than just hard work.

Here's how a small business can create a strategic plan: 

• Clarify your vision, mission, and values
• Conduct an environmental scan
• Define strategic priorities
• Develop goals and metrics
• Derive a strategic plan
• Write and communicate your strategic plan
• Implement, monitor, and revise

These steps provide a comprehensive framework for organizations to create, execute, and maintain an effective strategic plan.

For a more in-depth guide, check out this article on the  strategic planning process .

Simplify the process using strategic frameworks and templates

Strategic frameworks and templates can be invaluable tools, especially for those new to the process or looking to streamline their approach. They provide structure and ensure you don't overlook critical components. Here are some examples of strategic frameworks and templates and their specific use cases:

• Use case: Ideal for small businesses or startups needing a concise overview.
• Example : A tech startup might use this to outline its product development roadmap, key market targets, and growth milestones for the next 12 months.
• Use case: Perfect for teams setting specific, measurable objectives.
• Example: A sales team could use this to set targets like “Increase quarterly revenue by 15% through expanding into two new market segments by Q3.”
• Use case: Valuable for businesses conducting a comprehensive situational analysis.
• Example: A retail company might use this to assess its e-commerce capabilities (strength), limited physical presence (weakness), emerging markets (opportunity), and increasing online competition (threat).
• Use case: Suited for larger organizations needing to align various departments.
• Example: A healthcare provider could use this to track patient satisfaction (customer), operational efficiency (internal processes), staff training (learning and growth), and cost management (financial) metrics.
• Use case: Useful for project managers or team leaders implementing specific strategies.
• Example: A marketing team might use this to outline steps for a product launch, including timelines for content creation, media outreach, and performance tracking.

By choosing the right framework for your specific needs, you can significantly simplify the strategic planning process and ensure all crucial elements are addressed. Remember, these templates are starting points - customize them to fit your unique business context and goals.

Want to streamline strategic planning?

Strategic planning is more than a business exercise — it's a commitment to your future success. Whether you're learning how to write a strategic plan for a department or figuring out how to write a strategy for a project, the principles remain the same: clarity, focus, and actionable steps.

Writing a strategic plan from scratch may seem daunting, but it doesn't have to be. Our strategic intelligence platform, Quantive StrategyAI , can help you create a strategic plan based on your current business circumstances, ways of working, and goals. Here's how:

• AI-Powered Insights: StrategyAI analyzes your business data, both structured and unstructured, to provide contextually relevant insights and guidance at every step.
• End-to-end Management: From strategy development to execution and evaluation, StrategyAI offers a comprehensive solution to manage your entire strategic process.
• Adaptive Approach: The platform adapts to your business context, inputs, and way of working, eliminating the need for you to adjust to a new system.
• Data-Driven Decision Making: With over 170 integrations, StrategyAI connects with your business data sources, ensuring your insights are always fresh and relevant.
• Always-On Strategy: StrategyAI enables a continuous, responsive, and connected approach to strategy, which is crucial for success in today's fast-paced business environment.

At Quantive, we specialize in turning complex business challenges into clear, effective strategies. Our AI-powered platform, combined with our team of experts, can guide you through the process, helping you create and execute a strategic plan that drives real results.

Quantive empowers modern organizations to turn their ambitions into reality through strategic agility. It's where strategy, teams, and data come together to drive effective decision-making, streamline execution, and maximize performance.     

As your company navigates today’s competitive landscape, you need an Always-On Strategy to continuously bridge the gap between current and desired business outcomes. Quantive brings together the technology, expertise, and passion for transforming your strategy and playbooks from a static formulation to a feedback-driven engine for growth.    

Whether you’re a fast-growing scale-up, a mid-market business looking to conquer, or a large enterprise looking for innovation, Quantive keeps you ahead – every step of the way. For more information, visit  www.quantive.com .

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Why A Thoughtful Business Plan Is Essential For Success

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Starting a business is an exciting journey, full of opportunities and challenges. For women entrepreneurs, particularly those transitioning from corporate life to entrepreneurship, the path can feel daunting. But with the right roadmap (a well-thought-out business plan), you can navigate the uncertainties and set your business up for success.

A business plan is more than just a document; it's your blueprint for building and growing your business. It outlines your goals, strategies, and the steps you need to take to achieve them. A strong business plan not only guides your decisions but also communicates your vision to potential investors, partners, and employees.

Here’s why a business plan is crucial and how you can create one that will steer your business toward success.

The Importance of a Well-Thought-Out Business Plan

1. clarifies your vision and objectives.

As you build out your business plan it forces you to think deeply about your business idea and if it’s a viable idea. What exactly are you trying to achieve? What are your short-term and long-term goals? By putting these thoughts on paper, you create a clear vision that will guide every decision you make.

2. Helps You Understand Your Market

Researching and writing a business plan requires you to analyze your market. Who are your competitors? Who is your target audience? What are the market trends? This understanding helps you position your business strategically and identify opportunities for growth.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024, 3. defines your strategy.

A business plan includes your marketing strategy, sales approach, and operational plan and outlines how you will achieve objectives. This strategic framework ensures that your efforts are aligned and focused on achieving your goals.

4. Secures Funding

If you need financial support to start or grow your business, a well-prepared business plan is essential. Investors and lenders want to see a clear plan for how you will generate revenue and repay any loans. A business plan that demonstrates a thorough understanding of your industry and a solid strategy is more likely to attract funding.

5. Guides Your Decision-Making

A business plan serves as a reference point, helping you make informed decisions that align with your long-term goals. By consistently referring to your business plan, you ensure that every decision contributes to the overarching vision and objectives of your business, ultimately driving growth and success.

6. Tracks Your Progress

A business plan includes milestones and key performance indicators (KPIs) that allow you to track your progress. Regularly reviewing your business plan helps you stay on course, adjust your strategies as needed, and celebrate your successes.

The bottom line is that creating a business plan is a crucial step in turning your entrepreneurial dreams into reality. It’s your roadmap, guiding you through the complexities of starting and growing a business. For women entrepreneurs, especially those transitioning from a corporate career, a well-thought-out business plan can provide the clarity, confidence, and direction needed to succeed. Take the time to craft a business plan that reflects your vision and sets the foundation for a thriving, profitable business.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and also guides established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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Keep Strategy Simple

• Graham Kenny

How to recognize when you need a strategic plan — and when you don’t.

Few companies have a clear idea of where strategy making ends and execution begins. As a result they develop strategic plans where they’re not required and fail to develop strategic plans where they are. To help prevent this happening to you Graham Kenny offers a few dos and don’ts: (1) Don’t develop strategic plans for functions; (2) Confine “strategy” to the business level; (3) Keep strategy and action separate; and (4) Be careful how you use the terms “strategy” and “strategic.”

In one of my recent LinkedIn discussions about business strategy, a commenter lamented : “Unfortunately, many of the strategic plans we see are no more than a mish-mash collage of ‘individual level’ rush-to-do’s, often missing out on an ‘organization-level’ cohesive and thought-through design intent.”

• Graham Kenny is the CEO of Strategic Factors and author of Strategy Discovery . He is a recognized expert in strategy and performance measurement who helps managers, executives, and boards create successful organizations in the private, public, and not-for-profit sectors. He has been a professor of management in universities in the U.S. and Canada.

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Imagine a symphony orchestra where each musician plays their own tune without listening to others. The result would be chaotic and dissonant, right? Similarly, in the business world, when decision-making happens in silos and planning processes are disconnected, it’s like having a group of individuals playing their own instruments without any coordination. The harmony is lost, and the organization becomes inefficient, misses opportunities, and struggles to keep up with the fast-paced market.

Integrated Business Planning (IBP) addresses these challenges by providing a comprehensive framework that integrates strategic, operational and financial planning, analysis, and reporting to drive better business outcomes.   A retail company experiences a sudden surge in online sales due to a viral social media campaign. Integrated planning incorporates supply chain planning, demand planning, and demand forecasts so the company can quickly assess the impact on inventory levels, supply chain logistics, production plans, and customer service capacity. By having real-time data at their fingertips, decision-makers can adjust their strategies, allocate resources accordingly, and capitalize on the unexpected spike in demand, ensuring customer satisfaction while maximizing revenue.   This blog explores the significance of IBP in today’s modern business landscape and highlights its key benefits and implementation considerations.

Integrated Business Planning (IBP) is a holistic approach that integrates strategic planning, operational planning, and financial planning within an organization. IBP brings together various functions, including sales, marketing, finance, supply chain, human resources, IT and beyond to collaborate across business units and make informed decisions that drive overall business success. The term ‘IBP’ was introduced by the management consulting firm Oliver Wight to describe an evolved version of the sales and operations planning (S&OP process) they originally developed in the early 1980s.

1. Strategic planning

Integrated Business Planning starts with strategic planning. The management team defines the organization’s long-term goals and objectives. This includes analyzing market trends, competitive forces, and customer demands to identify opportunities and threats. Strategic planning sets the direction for the entire organization and establishes the foundation for subsequent planning roadmap.

2. Operational planning

Operational planning focuses on translating strategic goals into actionable plans at the operational level. This involves breaking down the strategic objectives into specific targets and initiatives that different departments and functions need to execute.

For example, the sales department might develop a plan to enter new markets or launch new products, while the supply chain department focuses on inventory optimization and ensuring efficient logistics. The key is to align operational plans with the broader strategic objectives to ensure consistency and coherence throughout the organization.

3. Financial planning

Financial planning ensures that the organization’s strategic and operational plans are financially viable. It involves developing detailed financial projections, including revenue forecasts, expense budgets, and cash flow forecasts. By integrating financial planning with strategic and operational planning, organizations can evaluate financial profitability, identify potential gaps or risks, and make necessary adjustments to achieve financial targets.

 4. Cross-functional collaboration

A fundamental aspect of IBP is the collaboration and involvement of various functions and departments within the organization. Rather than working in isolation, departments such as sales, marketing, finance, supply chain, human resources, and IT come together to share information, align objectives, and make coordinated decisions.

5. Data integration and analytics

IBP relies on the integration of data from different sources and systems. This may involve consolidating data from enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, supply chain management systems, and other relevant sources. Advanced analytics and business intelligence tools are utilized to analyze and interpret the data, uncovering insights and trends that drive informed decision-making.

6. Continuous monitoring and performance management

The Integrated Business Planning process requires continuous monitoring of performance against plans and targets. Key performance indicators (KPIs) are established to measure progress and enable proactive management. Regular performance reviews and reporting enable organizations to identify deviations, take corrective actions, and continuously improve their planning processes.

By integrating strategic, operational, and financial planning organizations can unlock the full potential of IBP and drive business success and achieve their goals.

Enhanced decision-making

IBP facilitates data-driven decision-making by providing real-time insights into various aspects of the business. By bringing together data from various departments, organizations can develop a holistic view of their operations, enabling them to make better-informed decisions.

Improved alignment

By aligning strategic objectives with operational plans and financial goals, IBP ensures that every department and employee is working towards a common vision. This alignment fosters synergy and drives cross-functional collaboration.

Agility and responsiveness

In the rapidly changing business landscape, agility is crucial. IBP allows organizations to quickly adapt to market shifts, demand fluctuations, and emerging opportunities. By continuously monitoring and adjusting plans, businesses can remain responsive and seize competitive advantages.

Optimal resource allocation

Integrated Business Planning enables organizations to optimize resource allocation across different functions. It helps identify bottlenecks, allocate resources effectively, and prioritize initiatives that yield the highest returns, leading to improved efficiency and cost savings.

Risk management

IBP facilitates proactive risk management by considering various scenarios and identifying potential risks and opportunities. By analyzing data and conducting what-if analyses, companies can develop contingency plans and mitigate risks before they materialize.

Implementing an effective IBP process requires careful planning and execution that may require substantial effort and a change of management, but the rewards are well worth it. Here are some essential strategic steps to consider:

1. Executive sponsorship

Establish leadership buy-in; gain support from top-level executives who understand the value of Integrated Business Planning and can drive the necessary organizational changes. Leadership commitment, led by CFO, is crucial for successful implementation.

2. Continuous improvement

Continuously monitor and adjust; implement mechanisms to monitor performance against plans and targets. Regularly review key performance indicators (KPIs), conduct performance analysis, and generate timely reports and dashboards. Identify deviations, take corrective actions, and continuously improve the planning processes based on feedback and insights.

3. Integration of people and technology

To foster cross-functional collaboration, the organization must identify key stakeholders, break down silos, and encourage open communication among departments. Creating a collaborative culture that values information sharing and collective decision-making is essential.

Simultaneously, implementing a robust data integration system, encompassing ERP, CRM, and supply chain management systems, ensures seamless data flow and real-time updates. User-friendly interfaces, data governance, and training provide the necessary technological support. Combining these efforts cultivates an environment of collaboration and data-driven decision-making, boosting operational efficiency and competitiveness.

4. Technology

Implement advanced analytics and business intelligence solutions to streamline and automate the planning process and assist decision-making capabilities. These solutions provide comprehensive functionality, data integration capabilities, scenario planning and modeling, and real-time reporting.

From a tech perspective, organizations need advanced software solutions and systems that facilitate seamless data integration and collaboration to support IBP. Here are some key components that contribute to the success of integrated business planning:

1. Corporate performance management

A platform that serves as the backbone of integrated business planning by integrating data from different departments and functions. It enables a centralized repository of information and provides real-time visibility into the entire business.

2. Business intelligence (BI) tools

Business intelligence tools play a vital role in analyzing and visualizing integrated data from multiple sources. These tools provide comprehensive insights into key metrics and help identify trends, patterns, and opportunities. By leveraging BI tools, decision-makers can quickly evaluate financial performance, make data-driven business decisions and increase forecast accuracy.

3. Collaborative planning and forecasting solutions

Collaborative planning and forecasting solutions enable cross-functional teams to work together in creating and refining plans. These planning solutions facilitate real-time collaboration, allowing stakeholders to contribute their expertise and insights. With end-to-end visibility, organizations can ensure that plans are comprehensive, accurate, and aligned with business strategy.

4. Data integration and automation

To ensure seamless data integration, organizations need to invest in data integration and automation tools. These tools enable the extraction, transformation, and loading (ETL) of data from various sources. Automation streamlines data processes reduces manual effort and minimizes the risk of errors or data discrepancies.

5. Cloud-based solutions

Cloud computing offers scalability, flexibility, and accessibility, making it an ideal choice for integrated business planning. Cloud-based solutions provide a centralized platform where teams can access data, collaborate, and make real-time updates from anywhere, at any time. The cloud also offers data security, disaster recovery, and cost efficiencies compared to on-premises infrastructure.

6. Data governance and security

As organizations integrate data from multiple sources, maintaining data governance and security becomes crucial. Establishing data governance policies and ensuring compliance with data protection regulations are vital steps in maintaining data integrity and safeguarding sensitive information. Implementing robust data security measures, such as encryption and access controls, helps protect against data breaches and unauthorized access.

IBM Planning Analytics  is a highly scalable and flexible solution for Integrated Business Planning. It supports and strengthens the five pillars discussed above, empowering organizations to achieve their strategic goals and make better data-driven decisions. With its AI- infused advanced analytics and modeling capabilities, IBM Planning Analytics allows organizations to integrate strategic, operational, and financial planning seamlessly. The solution enables cross-functional collaboration by providing a centralized platform where teams from various departments can collaborate, share insights, and align their plans. IBM Planning Analytics also offers powerful data integration capabilities, allowing organizations to consolidate data from multiple sources and systems, providing a holistic view of the business. The solutions’s robust embedded AI predictive analytics uses internal and external data and machine learning to provide accurate demand forecasts. IBM Planning Analytics supports continuous monitoring and performance management by providing real-time reporting, dashboards, and key performance indicators (KPIs) that enable organizations to track progress and take proactive actions.  As the business landscape continues to evolve, embracing Integrated Business Planning is no longer an option but a necessity for organizations. To succeed in this dynamic environment, businesses need an integrated approach to planning that brings all the departments and data together, creating a symphony of collaboration and coordination.

Learn more about IBM Planning Analytics

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Production Planning: Process, Factors, Challenges and Best Practices

Editorial team.

Cash Flow Inventory

• Last Updated: 18 th Feb 2024
• Inventory Management

Editorial Note: We earn a commission from partner links on Cash Flow Inventory. Commissions do not affect our editors' opinions or evaluations.

Editorial Note: We are an inventory management software provider. While some of our blog posts may highlight features of our own product, we strive to provide unbiased and informative content that benefits all readers.

Production planning is the process of designing and scheduling the production process to meet the demand for a product or service .

It involves identifying the necessary resources, such as raw materials, labor, and equipment, and allocating them to ensure that the production process runs smoothly.

Effective production planning is essential for businesses to meet customer demand, minimize costs, maximize efficiency, and optimize inventory levels .

Table of Contents

• Importance of Effective Production Planning
• Understanding Production Planning
• Production Planning Steps
• Factors Affecting Production Planning
• Benefits of Effective Production Planning
• Challenges and Best Practices in Production Planning

Importance of Effective Production Planning for Businesses:

Effective production planning is critical for businesses for several reasons:

• Meeting customer demand: By planning production efficiently, businesses can ensure that they meet customer demand for their products or services. This helps to maintain customer satisfaction, which is essential for building a loyal customer base.
• Minimizing costs: Effective production planning can help businesses reduce production costs by optimizing resource allocation, reducing waste, and improving production efficiency. This helps to increase profit margins and improve the financial health of the business.
• Maximizing efficiency: Effective production planning helps businesses to ensure that production runs smoothly and efficiently, with minimal downtime and delays. This can improve the overall productivity of the business and help it to operate more efficiently.
• Optimizing inventory levels: By planning production effectively, businesses can optimize inventory levels to avoid stockouts and minimize excess inventory . This can help businesses to save money by reducing storage costs and avoiding overproduction.

Effective production planning is essential for businesses to remain competitive and meet customer demand. It helps businesses to reduce costs, improve efficiency, and optimize inventory levels, which can have a significant impact on their financial health and overall success.

Understanding Production Planning:

Production planning is the process of designing and scheduling the production process to meet the demand for a product or service. The primary objective of production planning is to ensure that businesses can produce products or services efficiently and effectively to meet customer demand while minimizing costs and maximizing profits.

The key components of production planning include resource identification and allocation, scheduling, and inventory management . Resource identification involves identifying the necessary resources, such as raw materials, labor, and equipment, that are required to produce the product or service. Resource allocation involves assigning these resources in the most efficient manner to ensure that production runs smoothly.

Scheduling involves creating a timeline for production and allocating resources to ensure that products are produced in a timely manner. Inventory management involves managing inventory levels to ensure that the right amount of products are available to meet customer demand without overproducing or overstocking inventory.

Effective production planning requires businesses to consider a wide range of factors, including customer demand, production capacity, resource availability, and production costs. Businesses must also be able to respond quickly to changes in market demand, economic conditions, and other factors that may impact production.

Effective production planning is essential for businesses to meet customer demand, reduce costs, improve efficiency, and optimize inventory levels. It requires a coordinated effort across different departments and teams within a business to ensure that resources are allocated efficiently and that production runs smoothly.

Here are some specific examples of how production planning can be used in different industries:

• Automotive:  Production planning is used in the automotive industry to schedule the production of cars, trucks, and other vehicles. This involves taking into account factors such as demand forecasts, parts availability, and capacity constraints. Production planners also work to identify and mitigate potential bottlenecks in the production process.
• Aerospace:  Production planning is essential in the aerospace industry, where products are complex and often made to order. Production planners work with engineers and other stakeholders to develop production schedules that meet customer requirements while also being efficient and cost-effective.
• Electronics:  In the electronics industry, production planning is used to manage the production of a wide variety of products, from circuit boards to smartphones. Production planners work to ensure that the right materials are available at the right time, and that the production process is efficient and error-free.
• Food and beverage:  Production planning is used in the food and beverage industry to ensure that products are produced safely and efficiently. Production planners work to schedule production runs, manage inventory levels, and comply with food safety regulations.
• Pharmaceuticals:  Production planning is critical in the pharmaceutical industry, where products are often complex and subject to strict regulations. Production planners work to ensure that drugs are produced safely and effectively, and that they meet all regulatory requirements.

These are just a few examples of how production planning is used in different industries. The specific ways in which production planning is used will vary depending on the industry, the products being produced, and the company’s specific needs.

Production Planning Steps:

While the essential steps in production planning remain similar across industries, the specifics can vary. Here’s a deeper dive into each stage:

1. Demand Forecasting:

• Quantitative methods:  Analyze historical sales data, market trends, economic indicators, and competitor activity to predict future demand.
• Qualitative methods:  Consider expert opinions, customer surveys, and marketing campaigns to understand buying intentions.
• Forecasting accuracy is crucial:  Inaccurate forecasts can lead to overproduction, stockouts, and wasted resources.

2. Resource Determination:

• Material requirements:  Calculate the quantity and type of raw materials needed based on the forecasted demand and product specifications.
• Human resources:  Assess the number and skills of personnel required for different production stages.
• Equipment and machinery:  Identify the machines and tools needed, considering capacity, maintenance schedules, and potential bottlenecks.

3. Scheduling and Routing:

• Sequencing:  Determine the order in which products will be produced, considering lead times, dependencies, and machine availability.
• Scheduling:  Assign specific start and finish times to production tasks, aiming for optimal resource utilization and minimizing idle time.
• Routing:  Define the sequence of operations each product will undergo within the production process.

4. Capacity Planning:

• Match resource capacity with demand:  Analyze production capabilities to ensure they can meet the forecasted demand without overloading resources.
• Identify and address bottlenecks:  Proactively identify areas where production could be slowed down and implement solutions like outsourcing or capacity expansion.
• Consider flexibility:  Build in buffers or alternative options to adapt to unexpected changes in demand or material availability.

5. Procurement and Inventory Management:

• Purchase orders:  Issue orders to suppliers for required materials based on the production schedule and lead times.
• Inventory control:  Maintain optimal inventory levels to avoid stockouts while minimizing holding costs.
• Supplier collaboration:  Partner with reliable suppliers to ensure timely deliveries and manage potential supply chain disruptions.

6. Monitoring and Control:

• Track progress:  Monitor production against the plan, identifying deviations and potential delays.
• Make adjustments:  Adjust schedules, resource allocation, or inventory levels as needed to address deviations and optimize production.
• Performance metrics:  Regularly measure and analyze key metrics like production efficiency, on-time delivery, and quality control to identify areas for improvement.

Additional Considerations:

• Integration with other functions:  Production planning should be integrated with other departments like sales, marketing, and finance for holistic planning and resource allocation.
• Software tools:  Utilize production planning software to automate tasks, improve data analysis, and optimize scheduling and resource allocation.
• Continuous improvement:  Regularly review and refine the production planning process based on lessons learned and industry best practices.

Remember , the specific steps and level of detail will vary depending on your industry, product complexity, and company size. By understanding these underlying steps and adapting them to your specific needs, you can create an effective production planning process that ensures efficiency, quality, and timely deliveries.

Factors Affecting Production Planning:

Effective production planning requires careful consideration of numerous factors that can influence your success. Here are some key aspects to consider:

• Demand variability:  Fluctuations in customer demand can significantly impact production schedules. Understanding historical trends, seasonal patterns, and potential promotions is crucial for accurate forecasting.
• Lead times:  The time it takes to acquire raw materials, components, and finished goods needs to be factored into planning to avoid stockouts or overproduction.
• Product mix:  Different products often have varying production complexities and lead times, requiring adjustments in planning and resource allocation.
• Production capacity:  Understanding your machines, manpower, and their limitations is essential to avoid overloading the system and ensure smooth production flow.
• Material availability:  Reliable suppliers and timely deliveries are crucial for avoiding production delays caused by stockouts.
• Human resources:  Skilled personnel, training needs, and potential absenteeism need to be considered to ensure sufficient resources for planned production activities.
• Cost of production:  Analyzing material, labor, and overhead costs helps optimize production processes and minimize expenses.
• Inventory carrying costs:  Holding excess inventory incurs storage, handling, and potential obsolescence costs, necessitating careful inventory management.
• Budget constraints:  Production plans must align with available financial resources to avoid exceeding budgets and jeopardizing financial stability.

External Factors:

• Regulations and compliance:  Adhering to safety, environmental, and other regulatory requirements can impact production processes and timelines.
• Supply chain disruptions:  Unexpected events like natural disasters or geopolitical issues can disrupt material supply chains, necessitating adaptable planning.
• Technological advancements:  New technologies offer opportunities to improve efficiency and capacity, but their integration and potential disruptions need to be considered.

Additional factors:

• Quality control:  Maintaining consistent quality standards requires incorporating quality checks and procedures into the production plan.
• Maintenance and repairs:  Scheduling equipment maintenance and repairs minimizes downtime and ensures production continuity.
• Sustainability:  Integrating sustainable practices into production plans can improve environmental impact and brand image.

Remember , these factors are interconnected and interdependent. Effective production planning involves analyzing these elements collaboratively and adapting your plan as needed to ensure optimal production operations.

Benefits of Effective Production Planning:

Effective production planning offers a wide range of benefits that can significantly improve your business operations. Here are some of the key advantages:

Increased Efficiency and Productivity:

• Reduced bottlenecks:  By analyzing workflows and identifying potential obstacles, effective planning helps streamline processes, minimize downtime, and maximize resource utilization.
• Optimized resource allocation:  Planning ensures the right people, materials, and equipment are available at the right time and place, eliminating unnecessary waiting and rework.
• Improved scheduling:  Well-defined schedules create clarity and direction for workers, leading to increased focus and output.

Reduced Costs:

• Lower inventory levels:  Accurate demand forecasting and just-in-time production methods minimize the need for excess inventory, reducing associated storage, handling, and obsolescence costs.
• Reduced waste:  Optimized production processes generate less scrap and rework, further lowering material costs.
• Lower lead times:  Faster production cycles decrease holding costs and enable quicker response to customer needs.

Enhanced Customer Satisfaction:

• On-time deliveries:  Effective planning leads to reliable production schedules, allowing you to meet or exceed delivery commitments and build customer trust.
• Improved product quality:  Consistent processes and optimized resource allocation contribute to higher quality standards, reducing defects and enhancing customer satisfaction.
• Increased responsiveness:  Flexibility in planning allows you to adapt to changing customer demands and market conditions, ensuring you can effectively meet their needs.

Additional Benefits:

• Improved decision-making:  Data-driven production plans provide valuable insights for informed decision-making, ultimately leading to better business strategy.
• Reduced risk:  Proactive planning helps identify and mitigate potential problems before they impact production, minimizing risk and ensuring smooth operations.
• Stronger competitive advantage:  Efficient and cost-effective production gives you a competitive edge in the market.

Remember, the specific benefits of effective production planning will vary depending on your industry, business size, and unique needs. However, by implementing a well-defined and adaptable planning process, you can unlock significant improvements in efficiency, cost, customer satisfaction, and overall business performance.

Examples (How It works):

Beyond general statements about cost reduction and efficiency, let’s dive into specific, quantifiable benefits that effective production planning can bring to different departments and business areas:

Increased Sales and Revenue:

• Reduced lead times:  Faster production turnaround means quicker deliveries, allowing you to capture early-bird sales and fulfill customer orders promptly. This can lead to a  5-10% increase in sales  by meeting tight deadlines and minimizing order cancellations.
• Improved product availability:  Optimized inventory management based on accurate forecasts minimizes stockouts, ensuring products are ready when customers need them. This can translate to  2-5% additional revenue  by preventing lost sales due to unavailability.
• Enhanced product quality:  Consistent control over resources and processes reduces defects and production errors, leading to  increased customer satisfaction and repeat purchases . This can generate  3-7% growth in revenue  through customer loyalty and positive word-of-mouth.

Reduced Costs and Improved Profitability:

• Minimized waste:  Streamlined production processes with fewer bottlenecks prevent excess material usage and rework, leading to  5-10% cost savings  on raw materials and labor.
• Optimized inventory levels:  Efficient inventory management reduces storage costs and the risk of obsolescence, potentially saving  3-7%  on inventory carrying costs.
• Lower downtime:  Proactive maintenance and contingency plans minimize equipment breakdowns and production stoppages, saving  2-5%  on lost production time and associated costs.

Enhanced Customer Satisfaction and Loyalty:

• On-time deliveries:  Meeting promised delivery dates consistently builds trust and avoids customer dissatisfaction, leading to  improved customer retention and positive reviews . This can translate to  2-4% higher customer lifetime value .
• Reduced order errors:  Accurate planning and communication minimize incorrect orders and product substitutions, improving customer experience and  lowering return rates by 3-7% .
• Improved product quality:  Consistent quality control reduces defects and complaints, leading to  higher customer satisfaction and loyalty , potentially increasing  repeat purchases by 5-8% .

Improved Team Productivity and Morale:

• Clear task assignments and deadlines:  Well-defined production plans minimize confusion and delays, allowing employees to focus on their tasks and improve  individual productivity by 5-10% .
• Reduced stress and frustration:  Streamlined processes and clear communication mitigate unexpected roadblocks and resource conflicts, fostering a  more positive work environment and reducing employee turnover by 2-4% .
• Increased sense of ownership and accountability:  Engaging employees in planning and reviewing processes can lead to a  stronger sense of ownership and responsibility , improving  performance by 3-5% .

These are just a few specific examples of how effective production planning can benefit different areas of your business. By quantifying these impacts and aligning them with your specific goals, you can build a compelling case for investing in improved production planning processes.

Remember, the actual benefits will vary depending on your industry, company size, and specific implementation. However, by focusing on these potential improvements and tailoring them to your context, you can unlock significant value through effective production planning.

Challenges and Best Practices in Production Planning:

Production planning can be a complex process that involves several challenges.

Challenges in Production Planning:

Production planning comes with its fair share of hurdles. Here are some common challenges encountered:

• Demand forecasting:  Accurately predicting future demand can be difficult due to changing market trends, customer preferences, and external factors. Inaccurate forecasts can lead to overproduction (wasting resources) or underproduction (failing to meet customer needs).
• Resource management:  Balancing the availability of resources (e.g., personnel, equipment, materials) with production needs can be tricky. Bottlenecks and delays can occur if resources are stretched too thin.
• Scheduling:  Creating efficient schedules that take into account all tasks, lead times, and dependencies is complex. Scheduling conflicts and inefficiencies can compromise production flow.
• Communication:  Ensuring clear and consistent communication between different departments (e.g., production, sales, procurement) is crucial for aligning efforts. Inadequate communication can lead to errors and disruptions.
• Disruptions:  Unexpected events like equipment breakdowns, supplier issues, or natural disasters can throw off production plans, requiring flexibility and quick adjustments.
• Data management:  Maintaining accurate and up-to-date data on inventory, production capacity, and other critical factors is vital for effective planning. Inaccurate data leads to poor decision-making.

Best Practices for Overcoming Challenges:

Despite the challenges, several best practices can help you navigate production planning successfully:

• Embrace technology:  Utilize advanced planning and scheduling software to optimize resource allocation, identify bottlenecks, and simulate different scenarios.
• Invest in accurate forecasting:  Employ data analysis and statistical methods to improve demand forecasting accuracy, considering historical trends, market research, and external factors.
• Implement collaborative planning:  Foster communication and collaboration across departments to ensure aligned goals and efficient resource utilization.
• Practice real-time monitoring:  Track production progress closely, identify deviations from the plan, and make adjustments as needed to maintain efficiency and meet deadlines.
• Build flexibility into your plan:  Create contingency plans and alternative scenarios to adapt to unexpected disruptions and maintain production flow.
• Focus on continuous improvement:  Regularly review and analyze production data, identify areas for improvement, and implement changes to refine your planning process.
• Invest in employee training:  Provide training to your workforce on efficient production practices, quality control procedures, and the importance of clear communication.

By adopting these best practices and proactively addressing potential challenges, you can create a robust and adaptable production plan that optimizes efficiency, minimizes costs, and ultimately enhances your business success.

Conclusion:

Effective production planning is critical for businesses to improve efficiency, increase productivity, manage inventory levels, reduce lead times, improve customer satisfaction , and lower costs.

However , production planning can be complex and challenging, involving factors such as demand variability , resource availability, production capacity, lead times , cost of production, and technology and automation.

Led by Mohammad Ali (15+ years in inventory management software), the Cash Flow Inventory Content Team empowers SMBs with clear financial strategies. We translate complex financial concepts into clear, actionable strategies through a rigorous editorial process . Our goal is to be your trusted resource for navigating SMB finance.

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Enhancing your CPG business plan with revenue forecasting and optimization

In the fast-moving world of consumer-packaged goods (CPG), having a solid business plan is crucial for success. A well-structured CPG business plan not only aligns strategic goals with operational actions but also ensures efficient resource allocation and predictable growth. A further step in CPG business planning is to enable enhanced revenue forecasting and optimization by integrating R evenue Growth Management (RGM) and Integrated Business Planning (IBP). 

By combining and integrating the planning cycles of RGM and IBP, CPG companies can create a more comprehensive and dynamic business plan. RGM focuses on identifying and leveraging growth opportunities, while IBP ensures that all aspects of the business are aligned and working towards common goals. Together, they provide a powerful framework for driving revenue growth and achieving long-term success. 

The importance of a robust CPG business plan

For CPG companies, a comprehensive business plan is more than just a document—it’s a strategic tool. A robust plan aligns the company’s vision with actionable steps. It also ensures that every department works towards common goals. This alignment is crucial for efficient resource allocation, enabling companies to maximize their assets and achieve sustainable growth. 

Without a structured plan, CPG companies face significant challenges. Operations can become misaligned, leading to inefficiencies and wasted resources. A lack of coordination can also result in missed growth opportunities and an inability to respond effectively to market changes. Moreover, without a clear roadmap, companies may struggle to maintain focus and direction, making it difficult to achieve longer-term objectives. 

In essence, a well-crafted CPG business plan is vital for navigating the complexities of the market. It provides a clear framework for aligning strategic goals with tactical operations. This ensures that resources are used effectively, and growth opportunities are seized. 

How RGM and IBP complement each other 

Revenue Growth Management (RGM) and Integrated Business Planning (IBP) are two powerful methodologies in their own right. When combined, they create a synergy that enhances revenue forecasting and optimization for CPG companies. By focusing on RGM, companies can set the right strategies for the future and make them actionable. This involves identifying profitable growth opportunities, optimizing pricing and portfolio, and managing promotions effectively . 

On the other hand, IBP ensures that all aspects of the business align with the execution of the strategic vision. This includes synchronizing promotions, pricing, and operations to ensure that they work together seamlessly. The integration of RGM and IBP thus provides a comprehensive approach to business planning, where CPGs can combine strategic insights with operational precision. 

The balanced focus on RGM and IBP ensures that every aspect of business planning is interconnected and mutually reinforcing. This holistic approach provides a competitive edge in the CPG industry. By leveraging the strengths of both methodologies, companies can achieve a full P&L view. They can also gain clear visibility into commercial drivers, ultimately driving long-term revenue growth. 

The role of technology in managing your CPG business plan  

In today’s digital age, technology plays a pivotal role in managing and optimizing a CPG business plan. Software solutions that support RGM and IBP are essential for driving efficiency and achieving strategic goals. These tools enable companies to forecast revenue accurately, optimize pricing and promotions, and ensure that all aspects of the business contribute to the long-term vision. 

When selecting software solutions for RGM and IBP, there are several key features to look for. Scalability is crucial, as it ensures that the software can grow with your business and handle increasing amounts of data and complexity. Connectivity is another important feature, as it allows for seamless integration with other systems and data sources, providing a holistic view of the business. Flexibility is also essential, as it enables the software to adapt to changing market conditions and business needs. 

Moreover, it’s important to choose tools developed by industry insiders. People who understand the unique challenges and opportunities within the CPG sector. These experts can design software that addresses specific pain points. Obviously, it also leverages industry best practices, ensuring that your business plan is both effective and efficient. 

Another critical aspect is the integration of embedded AI . AI-powered tools can analyze vast amounts of data to generate various scenarios. Thereby allowing companies to compare different strategies and make smarter decisions. This capability enhances the precision of revenue forecasting and helps businesses identify the most effective paths to growth. 

In summary, leveraging technology to support RGM and IBP is crucial for managing a successful CPG business plan. By selecting the right software solutions, companies can enhance their revenue forecasting and optimization, ultimately driving long-term growth and competitiveness. 

Visualfabriq: Empowering CPG Companies 

Visualfabriq stands out as a key player in empowering CPG companies with enhanced revenue forecasting and optimization . By leveraging AI-powered technology and industry expertise, Visualfabriq provides a comprehensive software suite designed to enhance revenue forecasting and optimize business planning. 

Visualfabriq’s software supports long-term revenue growth by offering a full Profit and Loss (P&L) view and clear visibility into commercial drivers. The software’s AI-powered capabilities enable scenario building and analysis, allowing companies to explore various strategies and make data-driven decisions. 

Moreover, Visualfabriq’s focus on RGM and IBP ensures that promotions, pricing, and operations are in sync with the strategic vision of the company. This alignment not only drives efficiency but also maximizes growth opportunities. By providing tools developed by industry insiders, Visualfabriq addresses specific pain points and leverages best practices to deliver effective and efficient solutions. 

In summary, Visualfabriq empowers CPG companies by integrating RGM and IBP, supporting long-term profitable revenue growth, based on a one-number principle and a reliable commercial outlook. 

Leveraging Revenue Growth Management (RGM) and Integrated Business Planning (IBP) in your CPG business plan is the way to go. This approach ensures that promotions, pricing, and operations are in sync with the strategic vision. Equally important, it leads to more accurate revenue forecasting and optimized business planning. 

Ready to see how integrating RGM and IBP can transform your CPG business plan? Request a demo . Or download our Revenue Forecasting & Optimization (RFO) brochure to learn more about how our solutions can help you achieve your strategic goals. 

CPG trends insight: Top 5 game changers for revenue growth management in 2025

How Integrated Business Planning helps you set, track, and achieve targets in CPG

Making AI actionable in CPG: A no-brainer? 

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Business Plan Boot Camp with Paisley

A business plan is a blueprint for starting and growing a business, as well as, the gateway to opportunities..

Get insights on starting and growing your business from an expert in the areas of business strategy, leadership, marketing, sales, and finance. Paisley Demby has over 25 years of business development and finance experience working with startups to large-scale multimillion-dollar corporations 

Join us for this comprehensive 10-week business planning course designed to provide an in-depth review of the components of a business plan. Learn about the different aspects of business plan development including developing growth strategies, industry research, assessing the competitive environment, identifying target markets, developing a marketing strategy, improving operations, and developing financial projections. 

This year's Business Plan Boot Camp has ended. You can access session recordings, handouts, and presentation slides on the Business Plan Boot Camp site  until December 31, 2024.  

Session 1: Crafting Your Company Description   Learn how to draft a Cover Page, Table of Contents, and Company Description section of your business plan.  Learn about the resources that are available to help you complete your business plan and launch your business.  Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

Session 2: Analyzing Your Industry  Learn how to research your industry and write the Industry Analysis section of your Business Plan.    Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

Session 3: Analyzing Your Target Market  Learn how to determine who your potential customer is and how to draft the target market section of your business plan.    Visit the Business Plan Boot Camp site to access the program recording, handout, and presentation slides.

Session 4: Analyzing Your Competitors   Learn how to analyze your competitors and how to draft the Competitor Analysis section of your plan.   Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.   Session 5: Identifying Growth Opportunities    Learn how to synthesize industry, competitor, and target market information to identify growth opportunities for your business and the possible risks.  Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

 Session 6: The 4 Ps of Marketing     Learn how to develop a comprehensive marketing strategy to reach your target demographic and how to draft the Marketing section of your business plan.    Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

Session 7: Business Operations   Learn how to identify core processes in your business operations and how to draft the Operations section of your business plan.       Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.     Session 8: Developing Milestones and an Exit Plan  Learn how to identify milestones achieved, target future milestones, and develop an exit plan for your business.  Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

Session 9 Developing Financial Statements  Learn how to read and build an income statement, statement of cash flow, and balance sheet.   Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

  Session 10: Creating Your Executive Summary Learn how to summarize your entire business plan in a 1-page executive summary and how to structure it to maximize the impact on a potential funder.      Visit the Business Plan Boot Camp site to view the recording, handout, and presentation slides.

This program is made possible by the Stavros Niarchos Foundation (SNF).  

Working together, we can reimagine medicine to improve and extend people’s lives.

Financial Planning & Analysis lead

About the role.

Major accountabilities:

Key contributor to the Leadership Therapeutic Areas (“TA”) assigned

• Critical member of the TA Management Team – helps to formulate strategies, guides investment, and implement actions that help to gain market share and increase profitability.
• Setting the tone for good financial practices within the BU
• Maintenance of the TA’s relationship with the local CPO finance team and specifically with the CCFO

2. Leader of Financial Planning

• Lead the Budget, Latest Estimation and Latest Outlook processes and discussions; integrate and coordinate financial processes with the Marketing planning processes at the local level
• Well thought-out and high-quality plans with transparency of assumptions and analyses of risks and opportunities
• Coordinated with all members of the TA management team (e.g., marketing, sales, medical)
• Also coordinated with the CPO (e.g., allocations, or on universal assumptions such as inflation rates)
• Challenging all contributors (including TA Head) to the budget/LE on the underlying assumptions to Budget/LE; pushing back on the team when appropriate
• Attention to forecasting accuracy for both sales and expenses (monthly)
• Participation in the long-term planning of the business through the Strategic Planning process
• Assisting in preparation of Budget/LE presentations for Regional Team
• Work closely with the local Marketing, Sales, Medical and Market Access teams sharing responsibility of formulating business strategies, guide investment and resource allocation, monitoring commitment, implement actions, shared approval responsibility.

3. Analysis/Reporting of Financial Performance 

• Full ownership of and responsibility for all aspects of the IMI BU P&L.
• Analysis of Sales and Market Share (including trending of data) to provide IMI management with insights into the business, early detection of risks/opportunities vs. plan, etc.
• Analysis and understanding of the commercial aspects of the business, e.g., discounts per channel, per customer and per brand.  Benchmark selected key indicators with other Novartis businesses and/or other international companies
• Analysis and control of operational expenses, incl. analysis of variations to the authorized budgets / LEs.
• Managing the headcount analysis and control
• Review and follow-up as needed on: aging of receivables (DSOs), surpluses or deficits of product inventories (stock-in-trade), IMI’s impact on overall CPO working capital and/or country asset limits, and payables to vendors 
• Evaluation of the BU’s Risks and Opportunities, including a latest outlook for the month/quarter/year; also identification and implementation of gap closing actions.
• Communication of unexpected events affecting performance, or impacting key assumptions, in a transparent and timely manner.
• Preparation of regular, comprehensive performance reports (including Business Review documents and monthly Executive Summary Reports) to the Regional Office on timely basis

4. Analysis of Business Proposals/investments.

• Financial evaluation of business proposals or projects for the assigned TAs. (e.g., Field Force expansion, launching of a new product or indication).
• Financial evaluation of Marketing investments and allocation of funds among potential projects to maximize return for the assigned TAs.  Use of appropriate analytical tools as necessary.
• Ad hoc analyses as may be necessary.

5. Strategic Planning

Prepare for IMI portfolio by managing the sensitivity of the external relationships including government and distributors where the market has a number of healthcare, and funding systems and the pricing for these new models will have a significant positive/negative implication on the Gulf (GCC) countries.

6. Management Cash Flow

• Lead the Budget, Latest Estimation and Latest Outlook processes and discussions
• Achieving the MCF%
• Explain MCF variances, opportunities, and challenges through budget and financial forecasts for use in Global and Regional.
• Application of general Balance Sheet and Cash Flow knowledge in support of the business
• Identify and utilize best practices in FP&A and disseminate them within the Organization.
• Ensure the IMI is compliant with internal control standards, reporting requirements, accounting guidance, and be observant for any potential CoC issues
• Assist with audits where required, and where follow-up is needed ensure compliance with / implementation of the agreed-to action plans.
• Assist with development / implementation of planning and analysis tools and/or systems
• Perform assigned NFCM controls with high quality and on a timely manner
• Ensure Saudi talent development and succession planning to meet the Saudization milestones; coach, guide and mentor FP&A associate within the country, including upscaling capabilities.
• Lead successful and efficient interaction with Distributors and Customers.
• Collaborate with Internal Audit and FCCR team to ensure consistent financial data reporting processes and results.
• Lead the Monthly Local and Regional Business Review.
• In the absent of the FRA team in the country, FP&A Lead plays major roll to ensure all the monthly reporting are meeting local expectations.
• Support FRA team in the monthly cross charge for Novartis AG (NCC changes).
• Support the FRA team in the monthly closing.
• Accompaniment throughout the institutional tender process. Ensures quick turnaround of ad-hoc analysis, providing accurate information / analysis required for timely decision-making.
•  Proactively carry out value added analyses on financial data, supporting and testing information provided by Global, Regional and Local financial officers. Assist with the development of detailed budget and financial forecasts for use in Global and Regional, as well as Country, Business Franchise, and Business Unit planning.
• Proactively interface with financial officers in other Country organizations to obtain financial best practices and in market data results, benchmarking country results and methods against ones from other markets.
• Drive continuous learning within the Country by performing post implementation financial analyses on past initiatives and sharing results across the organization Ensure consistency and interoperability between different financial reporting systems.
• Support CCFO to coordinate with cooperate tax department to resolve all tax related issues and assist to resolve all financial queries and statement analysis.
• Providing leadership, direction and management of the finance and accounting team
• Providing strategic recommendations to the CPO leadership members
• Establishing and developing relations with senior management and external partners and stakeholders.  

Ideal Background

• Degree educated in Business Administration, Financial management, Accountant, Industrial Engineer or Life Sciences. Desirable degrees: MBA, Chartered/Certified Accountant.
• Fluency in English is prerequisite, while knowledge of Arabic and would be an advantage.
• Significant (7-10 years) experience in budgeting and/or controlling positions or within pharmaceuticals industry.
• Experience designing and operating financial reporting and forecasting systems
• Excellent analytical ability.
• Strong written and oral communication skills, and ability to clearly present financial data in reports distributed to Regional and Global officers.

Why Novartis: Helping people with disease and their families takes more than innovative science. It takes a community of smart, passionate people like you. Collaborating, supporting and inspiring each other. Combining to achieve breakthroughs that change patients’ lives. Ready to create a brighter future together? https://www.novartis.com/about/strategy/people-and-culture

Join our Novartis Network: Not the right Novartis role for you? Sign up to our talent community to stay connected and learn about suitable career opportunities as soon as they come up: https://talentnetwork.novartis.com/network

Benefits and Rewards: Read our handbook to learn about all the ways we’ll help you thrive personally and professionally: https://www.novartis.com/careers/benefits-rewards

Novartis is committed to building an outstanding, inclusive work environment and diverse teams' representative of the patients and communities we serve.