importance of concept of business planning

Table of Contents

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

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

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

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

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

This isn’t surprising at all. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the key elements of a good business plan:

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

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

• Business Sorter

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

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

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

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

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

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

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

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

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

Strategic Planning

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

Tactical Planning

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

Contingency Planning

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

What Are the 7 Steps of a Business Plan?

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

Conduct Research

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

Have a Goal

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

Create a Company Profile

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

Describe the Company in Detail

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

Create a marketing plan ahead of time.

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

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

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

Incorporate Your Motivation

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

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

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

Services and Products

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

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

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

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

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

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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

Published: June 28, 2024

Years ago, I had an idea to launch a line of region-specific board games. I knew there was a market for games that celebrated local culture and heritage. I was so excited about the concept and couldn't wait to get started.

But my idea never took off. Why? Because I didn‘t have a plan. I lacked direction, missed opportunities, and ultimately, the venture never got off the ground.

And that’s exactly why a business plan is important. It cements your vision, gives you clarity, and outlines your next step.

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

Table of Contents

What is a business plan?

What is a business plan used for.

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Purposes of a Business Plan

What does a business plan need to include, types of business plans.

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A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies. The plan also includes a financial section that forecasts revenue, expenses, and cash flow, as well as a funding request if the business is seeking investment.

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

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

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted august 1, 2024 by kody wirth.

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

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

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

What is a business plan?

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

Why do you need a business plan?

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

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. 

The biggest mistake you can make is not writing a business plan, and the second is never updating it. By regularly reviewing your plan, you can understand what parts of your strategy are working and those that are not.

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

What can you do with your plan?

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

Test an idea

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

Market and competitive research alone can tell you a lot about your idea. 

• Is the marketplace too crowded?
• Is the solution you have in mind not really needed? 

Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability, and you can paint a pretty clear picture of your business’s potential.

Document your strategy and goals

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

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

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. 

So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can keep it up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

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

Better manage your business

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

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

What should your business plan include?

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

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover:

• The problem you’re solving
• A description of your product or service
• Your target market
• Organizational structure
• A financial summary
• Necessary funding requirements.

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

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. 

Lastly, outline the steps or milestones you’ll need to hit to launch your business successfully. If you’ve already achieved some initial milestones, like taking pre-orders or early funding, be sure to include them here to further prove your business’s validity. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the industry’s overall state and potential, who your ideal customers are, the positioning of your competition, and how you intend to position your own business.

This helps you better explore the market’s long-term trends, what challenges to expect, and how you will need to introduce and even price your products or services.

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

Marketing & sales

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

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

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

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history.

Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

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

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

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

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

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

Types of business plans explained

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

Traditional business plan

The tried-and-true traditional business plan (sometimes called a detailed business plan ) is a formal document meant for external purposes. It is typically required when applying for a business loan or pitching to investors. 

It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

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

Business model canvas

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

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update and much easier for you, your team, and anyone else to visualize your business operations. 

The business model canvas is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

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

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. 

A one-page business plan is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Growth plan

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

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . 

However, it’s even easier to convert into a more detailed business plan thanks to how heavily it’s tied to your financials. The overall goal of growth planning isn’t to just produce documents that you use once and shelve. Instead, the growth planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, concise, more focused on financial performance, and ensures that your plan is always up-to-date.

How can you write your own business plan?

Now that you know the definition of a business plan, it’s time to write your own.

Get started by downloading our free business plan template or try a business plan builder like LivePlan for a fully guided experience and an AI-powered Assistant to help you write, generate ideas, and analyze your business performance.

No matter which option you choose, writing a business plan will set you up for success. You can use it to test an idea, figure out how you’ll start, and pursue funding.  And if you review and revise your plan regularly, it can turn into your best business management tool.

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5 Fundamental Principles of Business Planning

4 min. read

Updated May 10, 2024

I’ve been doing business planning professionally since the 1980s. It’s changed a lot.

These days, I very much advocate the one-page business plan for managing all businesses and all business owners, regardless of whether or not you need the full formal traditional business plan used for seeking investment or business loans.  

What I recommend for real business planning has changed a lot over the decades, but these five fundamental business planning principles have remained constant.

1. Do only what you’ll use

Lean business means avoiding waste and doing only what has value.

Therefore, the right form for your business plan is the form that best serves your business purpose. Furthermore, for the vast majority of business owners, the purpose of planning is getting what they want from the business—setting strategy and tactics, executing, reviewing results, and revising as needed.

That purpose is best served with growth planning that starts with a one-page plan and continues with a planning process involving regular review and revision.

You keep it lean because that’s easier, better, and really all you’re going to use.

2. It’s a continuous process, not just a plan

With growth planning, your business plan is always a fresh, current version. You never finish a business plan, heave a sigh of relief, and congratulate yourself that you’ll never have to do that again. You don’t use it once and throw it away.

You don’t store it in a drawer to gather dust.

The PRRR cycle in growth planning

However, this kind of regularly updated planning is clearly better for business than a more static elaborate business plan. With growth planning, the plan is smaller and streamlined, so you can update it easily and often, at least once a month.

Your plan is much more useful than a static plan because it is always current, tracked and reviewed, frequently revised, and a valuable tool for managing.

• You run your business according to priorities.
• Your tactics match your strategy.
• Your specific business activities match your tactics.
• And accountability is part of the process.

The team is aware of the performance metrics, milestones, and progress, or lack thereof. Things get done.

Furthermore, even in the old days of elaborate business plans, it was always true that a good business plan was never done. I’ve been pointing that out in published books, magazine articles, and blog posts since the 1980s.

That’s not new with growth planning. It’s just more important and more obvious than ever before.

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• 3. It assumes constant change

One of the strongest and most pervasive myths about planning is dead wrong: planning doesn’t reduce flexibility. It builds flexibility. Growth planning manages change. It is not threatened by change.

People say, “ Why would I do a business plan? That just locks me in. It’s a straitjacket.”

And I say: wrong. Never do something just because it’s in the plan. There is no merit whatsoever in sticking to a plan just for the plan’s sake. You never plan to run yourself into a brick wall over and over.

Instead, understand that the plan relates long-term to short-term, sales to costs and expenses and cash flow, marketing to sales, and lots of other interdependencies in the business.

When things change—and they always do—the plan helps you keep track of what affects what else so you can adjust accordingly.

• 4. It empowers accountability

It is easier to be friends with your coworkers than to manage them well. Every small business owner suffers from the problem of management and accountability.

Growth planning sets clear expectations and then follows up on results. It compares results with expectations.

People on a team are held accountable only if management actually tracks results and communicates them to those responsible after the fact.

5. It’s planning, not accounting

One of the most common errors in business planning is confusing planning with accounting. This is true for growth planning too.

Although your projections look like accounting statements, they are just projections. They are always going to be off one way or another, and their purpose isn’t guessing the future exactly right but rather setting expectations and connecting the links between spending and revenue.

Then when you do your monthly reviews, having made the original projection makes adjustments easier.

They are two different dimensions.

Accounting goes from today backward in time in ever-increasing detail. Planning, on the other hand, goes forward into the future in ever-increasing summary and aggregation.

• How these principles apply to growth planning

All five of these principles apply to all business planning, not just growth business planning. However, it’s important to note that growth planning emphasizes all five.

It’s a reflection of the best in business planning.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 1. Do only what you’ll use
• 2. It’s a continuous process, not just a plan
• 5. It’s planning, not accounting

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

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What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

Looking for someone to write a business plan?

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Purposes of a Business Plan

These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

What are the essential components of a business plan?

Executive summary

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

Business description or overview

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

Product and price

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Competitive analysis

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Target market

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

Financial plan

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Funding requirements

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

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Types of business plan.

Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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How often should a business plan be reviewed and revised?

A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

What are the key elements of a lean startup business plan?

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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The importance of a business plan

Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.

Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.

What is a business plan?

A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.

Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success. ‍

Why is a business plan important?

A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

• A market analysis : gathering information about factors and conditions that affect your industry
• Competitive analysis : evaluating the strengths and weaknesses of your competitors
• Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
• Marketing: using your research to advertise your business
• Logistics and operations plans : planning and executing the most efficient production process
• Cash flow projection : being prepared for how much money is going into and out of your business
• An overall path to long-term growth

What is the purpose of a business plan?

A business plan is like a map for small business owners, showing them where to go and how to get there. Its main purposes are to help you avoid risks, keep everyone on the same page, plan finances, check if your business idea is good, make operations smoother, and adapt to changes. It's a way for small business owners to plan, communicate, and stay on track toward their goals.

10 reasons why you need a business plan

I know what you’re thinking: “Do I really need a business plan? It sounds like a lot of work, plus I heard they’re outdated and I like figuring things out as I go...”.

The answer is: yes, you really do need a business plan! As entrepreneur Kevin J. Donaldson said, “Going into business without a business plan is like going on a mountain trek without a map or GPS support—you’ll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for success.

To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business.

1. To help you with critical decisions

The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that small businesses can’t always afford. That’s where a business plan comes in.

Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time.

Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.

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2. To iron out the kinks

Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.

3. To avoid the big mistakes

Only about half of small businesses are still around to celebrate their fifth birthday . While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.

According to data from CB Insights , some of the most common reasons businesses fail include:

• No market need : No one wants what you’re selling.
• Lack of capital : Cash flow issues or businesses simply run out of money.
• Inadequate team : This underscores the importance of hiring the right people to help you run your business.
• Stiff competition : It’s tough to generate a steady profit when you have a lot of competitors in your space.
• Pricing : Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.

The exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis , every piece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don’t be afraid to scrap an idea you really loved if it turns out there’s no market need. Be honest with yourself!

Get a jumpstart on your business plan by creating your own cash flow projection .

4. To prove the viability of the business

Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point.

Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.

A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.

Want to prove there’s a market gap? Here’s how you can get started with market research.

5. To set better objectives and benchmarks

Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.

6. To communicate objectives and benchmarks

Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions any time there’s an absence. Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly.

Sharing your business plan with team members also helps ensure that all members are aligned with what you’re doing, why, and share the same understanding of long-term objectives.

7. To provide a guide for service providers

Small businesses typically employ contractors , freelancers, and other professionals to help them with tasks like accounting , marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.

8. To secure financing

Did you know you’re 2.5x more likely to get funded if you have a business plan?If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run. Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.

Learn what you need to get a small business loan.

9. To better understand the broader landscape

No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well. Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.

10. To reduce risk

Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.

Business plan FAQs

How does having a business plan help small business owners make better decisions.

Having a business plan supports small business owners in making smarter decisions by providing a structured framework to assess all parts of their businesses. It helps you foresee potential challenges, identify opportunities, and set clear objectives. Business plans help you make decisions across the board, including market strategies, financial management, resource allocation, and growth planning.

What industry-specific issues can business plans help tackle?

Business plans can address industry-specific challenges like regulatory compliance, technological advancements, market trends, and competitive landscape. For instance, in highly regulated industries like healthcare or finance, a comprehensive business plan can outline compliance measures and risk management strategies.

How can small business owners use their business plans to pitch investors or apply for loans?

In addition to attracting investors and securing financing, small business owners can leverage their business plans during pitches or loan applications by focusing on key elements that resonate with potential stakeholders. This includes highlighting market analysis, competitive advantages, revenue projections, and scalability plans. Presenting a well-researched and data-driven business plan demonstrates credibility and makes investors or lenders feel confident about your business’s potential health and growth.

Understanding the importance of a business plan

Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.

Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.

Related Posts

Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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What is a Business Plan and Why is it Important?

What is a business plan.

Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.

While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.

In fact, businesses that plan grow 30% faster than those that don’t. 1

For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.

Studies show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans. 2

Your plan should include explicit objectives for hiring new employees , market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.

Building an asset management business plan

Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on additional office, retail or work space.

Creating a marketing strategy

Marketing and market potential are important aspects of a plan for aspiring small businesses.

Getting your business in front of customers on a consistent basis is one of the keys to ensuring your business not only stays afloat but also thrives.

Marketing strategies can be simple, but before you decide on how you will get the word out, getting clear on your target audience and why your business solves their problem can make sticking to your marketing plan easier.

Knowing your unique market positioning can help you determine your messaging. Your marketing strategy should include who your target audience is, the platforms or methods you will connect with them on, and a measurement framework to determine if your efforts are working.

Take entrepreneur Scott Sultzer, who opened Sandwich Joint restaurant in downtown Los Angeles in 2009. “I included the potential marketing demographic of all those who lived in a certain area of the city,” he said of his marketing strategy. “My goal was to capture a certain percentage of all those people who lived and worked nearby.” 4

Created primarily as a marketing tool, Sulzer’s 10-page plan included such topics as target market breakdown, marketing strategy and market penetration. “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?” 4

Depending on your business, it’s important to have both brick-and-mortar marketing strategies as well as a plan for marketing your business online .

Seeking investment for your business

In addition to providing a roadmap for progress and a marketing plan , your business plan could also be important in securing funding .

Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether someone decides to invest – or how much they might choose to invest.

In fact, a study showed that businesses with a plan were more likely to receive formal financial support, such as funding, than businesses without one. 3

Hiring the right talent

A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. Sulzer used his business plan to secure a lease.

“I had to have a viable document that they could trust,” said Sulzer, who leased from one of the largest landowners in downtown Los Angeles. 4

“With a corporate landlord, they wouldn’t deal with me unless I had a business plan. I had to submit all my information and a plan that presented what I wanted to do, with financial breakdowns and percentages, demographics, and how I was going to get customers.” 4

For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan for hiring employees is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.

Setting business plan objectives for management

Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.

Ready to take the next step? Learn how to write a business plan .

Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going.

Find out how small business insurance from Nationwide can help you build and protect your business whether you are just starting up or already established.

1 https://www.effectuation.org/wp-content/uploads/2017/06/The-Multiple-Effects-of-Business-Planning-onNew-Venture-Performance-1.pdf , Accessed October 2021. 2 https://onlinelibrary.wiley.com/doi/abs/10.1111/0447-2778.00006 , Accessed October 2021. 3 https://www.tandfonline.com/doi/abs/10.1080/13504851.2014.967377 , Accessed October 2021. 4 Nationwide Interview with Scott Sultzer, 2016.

Disclaimer: The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided. Nationwide, Nationwide is on your side, and the Nationwide N and Eagle are services marks of Nationwide Mutual Insurance Company. © 2021 Nationwide.

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Resources for Your Growing Business

The importance of business plan: 5 key reasons.

A key part of any business is its business plan. They can help define the goals of your business and help it reach success. A good business plan can also help you develop an adequate marketing strategy. There are a number of reasons all business owners need business plans, keep reading to learn more!

Here’s What We’ll Cover:

What Is a Business Plan?

5 reasons you need a well-written business plan, how do i make a business plan, key takeaways.

A business plan contains detailed information that can help determine its success. Some of this information can include the following:

• Market analysis
• Cash flow projection
• Competitive analysis
• Financial statements and financial projections
• An operating plan

A solid business plan is a good way to attract potential investors. It can also help you display to business partners that you have a successful business growing. In a competitive landscape, a formal business plan is your key to success.

Check out all of the biggest reasons you need a good business plan below.

1. To Secure Funding

Whether you’re seeking funding from a venture capitalist or a bank, you’ll need a business plan. Business plans are the foundation of a business. They tell the parties that you’re seeking funding from whether or not you’re worth investing in. If you need any sort of outside financing, you’ll need a good business plan to secure it.

2. Set and Communicate Goals

A business plan gives you a tangible way of reviewing your business goals. Business plans revolve around the present and the future. When you establish your goals and put them in writing, you’re more likely to reach them. A strong business plan includes these goals, and allows you to communicate them to investors and employees alike.

3. Prove Viability in the Market

While many businesses are born from passion, not many will last without an effective business plan. While a business concept may seem sound, things may change once the specifics are written down. Often, people who attempt to start a business without a plan will fail. This is because they don’t take into account all of the planning and funds needed to get a business off of the ground.

Market research is a large part of the business planning process. It lets you review your potential customers, as well as the competition, in your field. By understanding both you can set price points for products or services. Sometimes, it may not make sense to start a business based on the existing competition. Other times, market research can guide you to effective marketing strategies that others lack. To have a successful business, it has to be viable. A business plan will help you determine that.

4. They Help Owners Avoid Failure

Far too often, small businesses fail. Many times, this is due to the lack of a strong business plan. There are many reasons that small businesses fail, most of which can be avoided by developing a business plan. Some of them are listed below, which can be avoided by having a business plan:

• The market doesn’t need the business’s product or service
• The business didn’t take into account the amount of capital needed
• The market is oversaturated
• The prices set by the business are too high, pushing potential customers away

Any good business plan includes information to help business owners avoid these issues.

5. Business Plans Reduce Risk

Related to the last reason, business plans help reduce risk. A well-thought-out business plan helps reduce risky decisions. They help business owners make informed decisions based on the research they conduct. Any business owner can tell you that the most important part of their job is making critical decisions. A business plan that factors in all possible situations helps make those decisions.

Luckily, there are plenty of tools available to help you create a business plan. A simple search can lead you to helpful tools, like a business plan template . These are helpful, as they let you fill in the information as you go. Many of them provide basic instructions on how to create the business plan, as well.

If you plan on starting a business, you’ll need a business plan. They’re good for a vast number of things. Business plans help owners make informed decisions, as well as set goals and secure funding. Don’t put off putting together your business plan!

If you’re in the planning stages of your business, be sure to check out our resource hub . We have plenty of valuable resources and articles for you when you’re just getting started. Check it out today!

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Business Plan

A summary document that outlines how and why a new business is being created

What is a Business Plan?

A business plan is a summary document that outlines how and why a new business is being created. New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives. The business plan underlines the strategies that need to be adopted in order to reach organizational goals, identify potential problems, and devise custom solutions for them.

In addition, potential investors look at business plans to evaluate the risk exposure of a particular entrepreneurial venture. Startups that try to attract employees and investors use business plans to solidify their claims regarding the potential profitability of a particular business idea. Existing companies may use business plans to deal with suppliers or manage themselves more effectively.

• A business plan is a summary document that outlines how and why a new business is being created.
• New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives.
• Existing companies may use business plans to deal with suppliers or manage themselves more effectively.

Why Use a Business Plan?

Owing to the following benefits of a well-researched and comprehensive business plan, preparing one is highly recommended, but not a mandate.

1. Feasibility

Entrepreneurs use a business plan to understand the feasibility of a particular idea. It is important to contextualize the worth of the proposed product or service in the current market before committing resources such as time and money. It helps to expand the otherwise limited view of a passionate innovator-turned-entrepreneur.

2. Focusing device

Formulating a concrete plan of action enables an organized manner of conducting business and reduces the possibility of losses due to uncalculated risks. Business plans act as reference tools for management and employees as they solidify the flow of communication, authority, and task allocation.

3. Foresight

The process of preparing a business plan often creates many unintended yet desired results. It functions on the principle of foresight as it helps one realize future hurdles and challenges that aren’t explicit. It also brings a variety of perspectives on the forefront, eventually leading to a more comprehensive future plan of action.

4. Raising capital

A business plan is an effective way of communicating with potential investors, and the level of expertise and time used in preparing a business plan also gives professional credibility to entrepreneurs . It analyzes and predicts the chances of success for the investor and helps to raise capital.

Features of a Good Business Plan

1. executive summary.

The executive summary functions as a reading guide, as it highlights the key aspects of the plan and gives structure to the document. It must describe ownership and history of formation. It is an abstract of the entire plan, describes the mission statement of the organization, and presents an optimistic view about the product/service/concept.

2. Business Description

This section presents the mission and vision of an organization. Business descriptions provide the concept of one’s place in the market and its benefits to future customers. It must include key milestones, tasks, and assumptions, popularly known as MAT. Big ideas are redundant without specifics that can be tracked. Fundamental questions to be answered include:

• Who are you?
• What is the product or service, and what are its differentiating characteristics?
• Where is the opportunity located?
• When will you start implementing your plan and expects cash flows or profits?
• Why should customers choose your company?
• How do you plan to run the business in terms of structure and regulatory compliance?

3. Market Strategies

The market strategies section presents the target consumer group and the strategies needed to tap into it. It requires meticulous analysis of all aspects of the market, such as demography, cultural norms, environmental standards, resource availability, prices, distribution channels , etc.

4. Competitive Analysis

The competitive analysis section aims to understand the entry barriers one could face due to other companies in the same or complementary sectors. The strengths of existing companies could be co-opted into one’s strategy, and the weaknesses of existing product development cycles could be exploited to gain a distinct advantage.

5. Design and Development Plan

It outlines the technical details of the product and its development cycle within the realm of production. In the sphere of circulation, it focuses on marketing and the overall budget required to reach organizational objectives.

6. Operations and Management Plan

The operations and management plan describes the cycle of business functions needed for survival and growth. It includes management functions such as task division, hierarchy, employee recruitment, and operational functions such as the logistics of the value chain , distribution, and other capital and expense requirements. The managers’ backgrounds must also be briefly included.

7. Financial Factors

The financials section should include the company’s balance sheet and cash flow projections. Financial data is imperative to provide credibility to any assertions or claims made about the future profitability of the business. The aim is to provide an accurate idea of the company’s value and ability to bear operational costs and earn profits.

Common Mistakes to Avoid While Writing a Business Plan

• The plan must not begin by stressing the superiority of one’s product or service, but instead by identifying a genuine problem faced by the consumer. The plan should then be presented as a way of bridging that gap between consumer expectations and industry offerings.
• A team’s expertise is displayed not by listing their academic achievements and employment history, but by stressing how the team’s experience is best suited for a particular industry sector or product. Often, teams with members who have failed in a past venture are successful in attracting capital.
• The most common mistake is to offer an excessively optimistic view of the opportunity. There is no market without competition and no venture without some degree of risk, and a business plan must portray the objective truth with sincerity.

Additional Resources

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst.

In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional CFI resources will be very helpful:

• 5 P’s of Marketing
• Business Model Canvas Template
• Profit Model
• Balanced Scorecard
• Value Proposition
• See all commercial lending resources
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• Business Planning
• Skills & Tools

Business planning skills describe your ability to create a roadmap for the success of a business. This ability encompasses documenting the specific details of the business such as the goals and aims that a firm sets, the planned steps towards the achievement of those goals, and the criteria that measures and monitors the firm’s success.

Whether an already established company or a new start-up, business planning is needed everywhere. Any document created in the process that organizes all the data, manages your plans, and communicates them to stakeholders is known as a ‘business plan’.

Why is business planning important

Business planning can be arduous as well as time-consuming but its importance is not debatable in any case. Whether planning an expansion of operations or launch of a new and exciting product, business planning is the necessity of all large and small companies.

Utilizing your skills to come up with a sound business plan requires a lot of research, hence, keeping you well-informed about the true position of your business in the market, relative to competitors. Gathering information for business planning purposes can help you identify any weaknesses and foresee potential threats so that strategies can be developed to deal with problems even before they occur.

The business plan that a company comes up with also serves as a reference point. It helps you determine whether or not you have drifted from your original vision and in case you have, it helps you get back on track. Therefore, starting a business without carefully planning it is like setting off on a journey without a roadmap. It can also serve as a great motivational tool when you review the plan to see how far you have already come.

How to improve business planning skills

Take the following measures to improve your business planning skills:

• Adopt a conservative approach . In all your financial projections and estimates, you must be conservative so that you don’t overpromise the returns to any particular business. For instance, if you are certain that the business will capture 30% of the market share I the first year, you may state is only as an opinion and give reasons for why you believe so. However, in making financial projections, taking only 10% market share into consideration will give much more credible results.
• Emphasize on people as much as ideas and concepts . As good as the business idea may be, it can never be successful enough until you make the acquisition of a strong management team a part of your planning. Venture capitalists as well as individual financiers are much more likely to invest in businesses that not only have a good concept but also a team with good credentials and expertise.
• Support every claim with evidence . Business planning requires making several claims but all those claims must be backed up by proof. Otherwise, you will have no credibility. If you say, for instance, that your staff qualified enough to make the business success, their resumes must reflect it too.

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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.

How to build an organizational strategy

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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. 

Related resources

15 creative elevator pitch examples for every scenario

How Asana streamlines strategic planning with work management

How to create a CRM strategy: 6 steps (with examples)

What is management by objectives (MBO)?

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Business Jargons

A Business Encyclopedia

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

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

Characteristics of Planning

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

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

Importance of Planning

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

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

Steps involved in Planning

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

Related terms:

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

Reader Interactions

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Planning in Management: Definitions, Importance, Characteristics, Process

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

What is Planning?

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

Table of Content

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

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

Definitions of Planning

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

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

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

Importance of Planning in Management

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

Forms Goals

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

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

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

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

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

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

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

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

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

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

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

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

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

Characteristics of Planning

The characteristics of the planning function are explained as follows:

Continuous Process

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

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

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

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

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

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

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

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

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

Process of Planning

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

Setting Organisational Objectives

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

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

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

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

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

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

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

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

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

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

Limitations of Planning

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

Time-consuming

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

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

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

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

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

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

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

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

Types of Plans

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

Some important types of plans are explained as follows:

Strategic plans

Tactical plans, operational plans, contingency plans.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are the Features of Planning?

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

What is the Process of Planning?

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

What is the Importance of Planning in Management?

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

Management Topics

• What is Management ?
• Who Is a Manager ?
• Marketing CIs Management an Art or Science

Classical Management Approach

• Planning in Management
• Decision Making in Management
• Organising in Management
• What is Organisation Structure ?
• What is Departmentation ?
• What is Span of Control ?
• What is Authority ?
• What is Staffing ?
• What is Human Resource Planning ?
• What is Job Analysis ?
• What is Recruitment ?

Modern and Others Schools of Management Thought

• What is Selection ?
• What is Coordination ?
• What is Controlling ?
• What is Leadership ?
• What is Organisational Change ?
• Motivation in Management
• Motivation Theories
• Maslow’s Hierarchy of Needs
• Herzberg Two Factor Theory
• Mcclelland’s Needs Theory of Motivation

Business Ethics

( Click on Topic to Read )

• What is Ethics?
• What is Business Ethics?
• Values, Norms, Beliefs and Standards in Business Ethics
• Indian Ethos in Management
• Ethical Issues in Marketing
• Ethical Issues in HRM
• Ethical Issues in IT
• Ethical Issues in Production and Operations Management
• Ethical Issues in Finance and Accounting
• What is Corporate Governance?
• What is Ownership Concentration?
• What is Ownership Composition?
• Types of Companies in India
• Internal Corporate Governance
• External Corporate Governance
• Corporate Governance in India
• What is Enterprise Risk Management (ERM)?
• What is Assessment of Risk?
• What is Risk Register?
• Risk Management Committee

Corporate social responsibility (CSR)

• Theories of CSR
• Arguments Against CSR
• Business Case for CSR
• Importance of CSR in India
• Drivers of Corporate Social Responsibility
• Developing a CSR Strategy
• Implement CSR Commitments
• CSR Marketplace
• CSR at Workplace
• Environmental CSR
• CSR with Communities and in Supply Chain
• Community Interventions
• CSR Monitoring
• CSR Reporting
• Voluntary Codes in CSR
• What is Corporate Ethics?

Lean Six Sigma

• What is Six Sigma?
• What is Lean Six Sigma?
• Value and Waste in Lean Six Sigma
• Six Sigma Team
• MAIC Six Sigma
• Six Sigma in Supply Chains
• What is Binomial, Poisson, Normal Distribution?
• What is Sigma Level?
• What is DMAIC in Six Sigma?
• What is DMADV in Six Sigma?
• Six Sigma Project Charter
• Project Decomposition in Six Sigma
• Critical to Quality (CTQ) Six Sigma
• Process Mapping Six Sigma
• Flowchart and SIPOC
• Gage Repeatability and Reproducibility
• Statistical Diagram
• Lean Techniques for Optimisation Flow
• Failure Modes and Effects Analysis (FMEA)
• What is Process Audits?
• Six Sigma Implementation at Ford
• IBM Uses Six Sigma to Drive Behaviour Change
• Research Methodology
• What is Research?
• What is Hypothesis?
• Sampling Method
• Research Methods
• Data Collection in Research
• Methods of Collecting Data
• Application of Business Research
• Levels of Measurement
• What is Sampling?
• Hypothesis Testing
• Research Report
• What is Management?
• What is Controlling?
• What is Coordination?
• What is Staffing?
• Organization Structure
• What is Departmentation?
• Span of Control
• What is Authority?
• Centralization vs Decentralization
• Organizing in Management
• Schools of Management Thought
• Is Management an Art or Science?
• Who is a Manager?

Operations Research

• What is Operations Research?
• Operation Research Models
• Linear Programming
• Linear Programming Graphic Solution
• Linear Programming Simplex Method
• Linear Programming Artificial Variable Technique
• Duality in Linear Programming
• Transportation Problem Initial Basic Feasible Solution
• Transportation Problem Finding Optimal Solution
• Project Network Analysis with Critical Path Method
• Project Network Analysis Methods
• Project Evaluation and Review Technique (PERT)
• Simulation in Operation Research
• Replacement Models in Operation Research

Operation Management

• What is Strategy?
• What is Operations Strategy?
• Operations Competitive Dimensions
• Operations Strategy Formulation Process
• What is Strategic Fit?
• Strategic Design Process
• Focused Operations Strategy
• Corporate Level Strategy
• Expansion Strategies
• Stability Strategies
• Retrenchment Strategies
• Competitive Advantage
• Strategic Choice and Strategic Alternatives
• What is Production Process?
• What is Process Technology?
• What is Process Improvement?
• Strategic Capacity Management
• Production and Logistics Strategy
• Taxonomy of Supply Chain Strategies
• Factors Considered in Supply Chain Planning
• Operational and Strategic Issues in Global Logistics
• Logistics Outsourcing Strategy
• What is Supply Chain Mapping?
• Supply Chain Process Restructuring
• Points of Differentiation
• Re-engineering Improvement in SCM
• What is Supply Chain Drivers?
• Supply Chain Operations Reference (SCOR) Model
• Customer Service and Cost Trade Off
• Internal and External Performance Measures
• Linking Supply Chain and Business Performance
• Netflix’s Niche Focused Strategy
• Disney and Pixar Merger
• Process Planning at Mcdonald’s

Service Operations Management

• What is Service?
• What is Service Operations Management?
• What is Service Design?
• Service Design Process
• Service Delivery
• What is Service Quality?
• Gap Model of Service Quality
• Juran Trilogy
• Service Performance Measurement
• Service Decoupling
• IT Service Operation
• Service Operations Management in Different Sector

Procurement Management

• What is Procurement Management?
• Procurement Negotiation
• Types of Requisition
• RFX in Procurement
• What is Purchasing Cycle?
• Vendor Managed Inventory
• Internal Conflict During Purchasing Operation
• Spend Analysis in Procurement
• Sourcing in Procurement
• Supplier Evaluation and Selection in Procurement
• Blacklisting of Suppliers in Procurement
• Total Cost of Ownership in Procurement
• Incoterms in Procurement
• Documents Used in International Procurement
• Transportation and Logistics Strategy
• What is Capital Equipment?
• Procurement Process of Capital Equipment
• Acquisition of Technology in Procurement
• What is E-Procurement?
• E-marketplace and Online Catalogues
• Fixed Price and Cost Reimbursement Contracts
• Contract Cancellation in Procurement
• Ethics in Procurement
• Legal Aspects of Procurement
• Global Sourcing in Procurement
• Intermediaries and Countertrade in Procurement

Strategic Management

• What is Strategic Management?
• What is Value Chain Analysis?
• Mission Statement
• Business Level Strategy
• What is SWOT Analysis?
• What is Competitive Advantage?
• What is Vision?
• What is Ansoff Matrix?
• Prahalad and Gary Hammel
• Strategic Management In Global Environment
• Competitor Analysis Framework
• Competitive Rivalry Analysis
• Competitive Dynamics
• What is Competitive Rivalry?
• Five Competitive Forces That Shape Strategy
• What is PESTLE Analysis?
• Fragmentation and Consolidation Of Industries
• What is Technology Life Cycle?
• What is Diversification Strategy?
• What is Corporate Restructuring Strategy?
• Resources and Capabilities of Organization
• Role of Leaders In Functional-Level Strategic Management
• Functional Structure In Functional Level Strategy Formulation
• Information And Control System
• What is Strategy Gap Analysis?
• Issues In Strategy Implementation
• Matrix Organizational Structure
• What is Strategic Management Process?

Supply Chain

• What is Supply Chain Management?
• Supply Chain Planning and Measuring Strategy Performance
• What is Warehousing?
• What is Packaging?
• What is Inventory Management?
• What is Material Handling?
• What is Order Picking?
• Receiving and Dispatch, Processes
• What is Warehouse Design?
• What is Warehousing Costs?

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Definition: Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be done and when it is to be done. It is the process of determining a course of action, so as to achieve the desired results. It helps to bridge the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. Planning is a higher order mental process requiring the use of intellectual faculties, imagination, foresight and sound judgment.

Planning may be defined as deciding in advance what to be done in future. It is the process of thinking before doing. It involves determination of goals as well as the activities required to be undertaken to achieve the goals.

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

• What will be done – what are the objectives of business in the short and in the long run?
• What resources will be required – This involves estimation of the available and potential resources, estimation of resources required for the achievement of objectives, and filling the gap between the two, if any.
• How it will be done – This involves two things : (i) determination of tasks, activities, projects, programmes, , required for the attainment of objectives, and (ii) formulation of strategies, policies, procedures, methods, standard and budgets for the above purpose.
• Who will do it – It involves assignment of responsibilities to various managers relating to contributions they are expected to make for the attainment of enterprise objectives. This is preceded by the breaking down of the total enterprise objectives into segmental objectives, resulting into divisional, departmental, sectional and individual objectives.
• When it will be done – It involves determination of the timing and sequence, if any, for the performance of various activities and execution of various projects and their parts.

Definition OF Planning by deferent Author

According to James Lundy:

“Planning means the determination of what is to be done, how it is to be done, who is to do it, and how results are evaluated.”

According to Henry Feyol:

“Planning is deciding the best alternatives among others to perform different managerial operation in order to achieve the pre- determined goals.”

According to Koontz, O’Donnell and Weihrich,

“ Planning is an intellectually demanding process; it requires the conscious determination of courses of action and the basing of decisions on purpose, knowledge and considered estimates”.

Myths About Planning

  There are certain commonly prevalent myths and fallacies about planning. An attempt is being made to highlight some of the important concepts of planning by way of its distinguishing features, so as to clarify the misconceptions:

1. Planning does no attempt to make future decisions :

Planning choosing of the more desirable future alternatives open to a company, is the process so that better decisions may be made.

Planning provides a frame of reference within which the present decisions are to be made. At the same time, a plan often leads to additional but related decisions. For example, a college plan to introduce a new degree or diploma, necessitates the need for decisions like what should be the duration of the course leading to the degree or diploma, together with detailed curricula in the specific courses to be included, the system of evaluation of examination, and the necessary practical training, if any, etc.

2. Planning is not just forecasting or making projections :

Forecasts are mere estimates of the future, and indicate what may or may not However, corporate planning goes beyond these forecasts and asks questions like :

• Are we in right business?
• What are our basic goals and objectives?
• When shall our present products become obsolete?
• Are our markets expanding or shrinking?
• Do we want to merge or go for takeover?

3. Planning is not a static process :

Indeed, plans are obsolete as soon as they are executed, because the environment assumed in their preparation may have already changed. Planning is a continuous process. It involves continuous analysis and adjustments of the plans and even objectives in the context of changing circumstances.

Nature of Planning

1. planning is a goal oriented.

Organization is set up with a general purpose in view. Specific goals are set out in the plans along with the activities to be achieving the goals. Thus, planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.

2. Planning is a Primary Function

Planning lays down the base for other functions of management. All other functions          are performed within the framework of plans drawn. Thus, planning precedes other function. The other functions of management are interrelated and equally important. However, planning provides the base of all the other functions.

3. Planning is Pervasive

Planning is required at all levels of management as well as in all departments of the organization. It is neither an exclusive function of top management nor of any particular department. But the scope of planning differs at different level and among different departments.

4. Planning is Flexible

Plans are drawn on the basis of forecasts. Since the future is uncertain, planning must cope with change in future condition. Activities planned with certain assumptions about the future may not come true.

5. Planning is a Continuous Process

Planning deals with the future, and future, by its very nature, is uncertain. Although the planner bases his plans on an informed and intelligent estimate of the future, the future events may not turnout to be exactly as predicted. This aspect of planning makes it a continuous process. Plans tend to be a statement of future intentions relating to objectives and means of their attainment. They do not acquire finality because revisions are needed to be made in them in response to changes taking place in the internal as well as external environment of enterprise. Planning should, therefore, be a continuous process and hence no plan is final, it is always subject to a revision.

6. Planning concerns all Managers

It is the responsibility of every manager to set his goals and operating plans. In doing so, he formulates his goals and plans within the framework of the goals and plans of his superior. Thus, planning is not the responsibility of the top management or the staff of planning department only; all those who are responsible for the achievement of results, have an obligation to plan into the future. However, managers at higher levels, being responsible for a relatively larger unit of the enterprise, devote a larger part of their time to planning, and the time span of their plans also tends to be longer than that of managers at lower levels. It shows that planning acquires greater importance and tends to the longer in the future at higher than at lower management levels.

7. Planning Commits an Organization into the Future

  Planning commits an organization into the future, as past, present and future is tied in a chain. An organization’s objectives, strategies, policies and operating plans affect its future effectiveness, as decisions made and activities undertaken in the present continue to have their impact into the future. Some of the plans affect the near future, while others affect it in the long run. For example, plans for product diversification or production capacity affect a company long into the future, and are not easily reversible, whereas plans relating to the layout of its office locations can be changed with relatively less difficulty in the future. This focuses on the need for better and more careful planning.

8. Planning is a Mental Exercise 

Planning requires application of the mind involving foresight, intelligent imagination and sound judgment. It is basically an intellectual activity of thinking rather than doing, because planning determines the action to be taken.

9. Planning is Antithesis of States Quo

Planning is undertaken with the conscious purpose of attaining a position for the company that would not be accomplished otherwise.

Planning, therefore, implies change in organizational objectives, policies, products, marketing strategies and so forth. However, planning itself is affected by unforeseen environmental changes. It, therefore, needs examination and re-examination, continual reconsideration of the future, constant searching for more effective methods and improved results.

Planning is thus an all pervasive, continuous and dynamic process. It imposes on all executives a responsibility to estimate and anticipate the future, prepare the organization to cope with its challenges as well as take advantage of the opportunities created by it, while at the same time, influence tomorrow’s events by today’s pre-emptive decisions and actions.

Importance of Planning

While planning does not guarantee success in organizational objectives, there is evidence that companies that engaged in formal planning consistently performed better than those with none or limited formal planning and improved their own performance over a period of time. It is very rare for an organization to succeed solely by luck or circumstances. Some of the reasons as to why planning is considered a vital managerial function are given below :

1. Planning is essential in modern business :

The growing complexity of the modern business with rapid technological changes, dynamic changes in the consumer preferences and growing tough competition necessities orderly operations, not only in the current environment but also in the future environment. Since planning takes a future outlook, it takes into account the possible future developments.

2. Planning affects performance :

A number of empirical studies provide evidence of organizational success being a function of formal planning, the success being measured by such factors as return on investment, sales volume, growth in earnings per share and so on. An investigation of firms in various industrial products as machinery, steel, oil, chemicals and drugs revealed that companies that engaged in formal planning consistently performed better than those with no formal planning.

3. Planning puts focus on objectives :

The effectiveness of formal planning is primarily based upon clarity of objectives. Objectives provide a direction and all planning decisions are directed towards achievement of these Plans continuously reinforce the importance of these objectives by focusing on them. This ensures maximum utility of managerial time and efforts.

4. Planning anticipates problems and uncertainties :

A significant aspect of any formal planning process in collection of relevant information for the purpose of forecasting the future as accurately as possible. This would minimize the chances of haphazard decisions. Since the future needs of the organization are anticipated in advance, the proper acquisition and allocation of resources can be planned, thus minimizing wastage and ensuring optimal utility of these resources.

5. Planning is necessary to facilitate control :

Controlling involves the continual analysis and measurement of actual operations against the established standards. These standards are set in the light of objectives to by Periodic reviews of operations can determine whether the plans are being implemented correctly. Well developed plans can aid the process of control in two ways.

First, the planning process establishes a system of advance warning of possible deviations from the expected performance. Second contribution of planning to the control process is that it provides quantitative data which would make it easier to compare the actual performance in quantitative terms, not only with the expectations of the organization but also with the industry statistics or market forecasts.

6. Planning helps in the process of decision making :

Since planning specifies the actions and steps to be taken in order to accomplish organizational objectives, it serves as a basis for decision-making about future It also helps managers to make routine decisions about current activities since the objectives, plans, policies, schedules and so on are clearly laid down.

Objectives of Planning

1.   reduce uncertainty:.

Future is uncertain. Planning may convert the uncertainty into certainty. This is possible to some extent by, planning which is reducing uncertainty.

2.   BRING CO0OPERATION AND CO-ORDINATION:

Planning can bring co-operation and co-ordination among various sectors of the organization. The rivalries and conflicts among departments could be avoided through planning.

3.   ECONOMY IN OPERATION:

As already pointed out, planning selected best alternative among various alternatives this will lead to the best utilization of recourses. The objectives of the organization are achieved easily.

4.   ANTICIPATE THE UNPREDICTABLE CONTINGENCIES:

Some events could not be predictable. These events are termed as contingencies. These events may affect the smooth functioning of an enterprise.

5.   ACHIVING THE PRE-DETERMINED GOALS:

Planning activities are aimed at achieving the objectives of the enterprise. The timely achievements of objectives are possible only effective planning.

6.   REDUCE COMPETITION:

The existence of competition enables the enterprise to get a chance for growth. At the same time, stiff competition should be avoided. It is possible, to reduce competition through planning.

Advantages And Limitations of Planning

The importance of formal planning has already been discussed. A vigorous and detailed planning programme helps managers to be future oriented. It gives the mangers some purpose and direction. A sound blue print for plans with specific objective and action statements has numerous advantages for the organization which are as follows :

1. Focuses Attention on Objectives :

Since all planning is directed towards achieving enterprise objectives, the very act of planning focuses attention on these objectives. Laying down the objectives is the first step in planning. If the objectives are clearly laid down, the execution of plans will also be directed towards these objectives.

2. Ensures Economical Operation :

Planning involves a lot of mental exercise which is directed towards achieving efficient operation in the enterprise. It substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work for uneven flow, and deliberate decisions for snap judgement costs. This helps in better utilization of resources and thus minimizing costs.

3. Reduces Uncertainty :

Planning helps in reducing uncertainties of future because it involves anticipation of future events. Effective planning is the result of deliberate thinking based on facts and It involves forecasting also. Planning gives an opportunity to a business manager to foresee various uncertainties which may be caused by changes in technology, taste and fashion of the people, etc. Sufficient provision is made in the plans to offset these uncertainties.

4. Facilitates Control :

Planning helps the managers in performing their function of control. Planning and control are inseparable in the sense that unplanned action cannot be controlled because control involves keeping activities on the predetermined course by rectifying deviations from Planning helps control by furnishing standards of control. It lays down objectives and standards of performance which are essential for the performance of control function.

5. Encourages Innovation and Creativity :

Planning is basically the deciding function of management. It helps innovative and creative thinking among the managers because many new ideas come to the mind of a manager when he is planning. It creates a forward looking attitude among the managers.

6. Improves Motivation :

A good planning system ensures participation of all managers which improves their motivation. It improves the motivation of workers also because they know clearly what is expected of Moreover, planning serves as a good training device for future managers.

7. Improves Competitive Strength :

Effective planning gives a competitive edge to the enterprise over other enterprises that do not have planning or have ineffective planning. This is because planning may involve expansion of capacity, changes in work methods, changes in quality, anticipation tastes and fashion of people and technological changes, etc.

8. Achieves Better Coordination :

Planning secures unity of direction towards the organizational objectives. All the activities are directed towards the common goals. There is an integrated effort throughout the enterprise. It will also help in avoiding duplication of efforts. Thus, there will be better coordination in the organization.

Limitations of Planning:

Sometimes, planning fails to achieve the expected results. There are many causes of failure of planning in practice. These are discussed below :

1. Lack of reliable data :

There may be lack of reliable facts and figures over which plans may be based. Planning loses its value if reliable information is not available or if the planner fails to utilize the reliable information. In order to make planning successful, the planner must determine the reliability of facts and figures and must base his plans on reliable information only.

2. Lack of initiative :

Planning is a forward looking process. If a manager has a tendency to follow rather than lead, he will not be able to make good Therefore, the planner must take the required initiative. He should be an active planner and should take adequate follow up measure to see that plans are understood and implemented properly.

3. Costly process :

Planning is time consuming and expensive process. This may delay action in certain cases. But it is also true that if sufficient time is not given to the planning process, the plans so produced may prove to be unrealistic. Similarly, planning involves costs of gathering and analyzing information and evaluation of various alternatives. If the management is not willing to spend on planning, the results may not be good.

4. Rigidity in organizational working :

Internal inflexibility in the organization may compel the planners to make rigid plans. This may deter the managers from taking initiative and doing innovative So the planners must have sufficient discretion and flexibility in the enterprise. They should not always be required to follow the procedures rigidly.

5. Non-acceptability of change :

Resistance to change is another factor which puts limits on It is a commonly experienced phenomenon in the business world. Sometimes, planners themselves do not like change and on other occasions they do not think it desirable to bring change as it makes the planning process ineffective.

6. External limitations :

The effectiveness of planning is sometimes limited because of external factors which are beyond the control of the planners. External strategies are very difficult to predict. Sudden break-out of war, government control, natural havocs and many other factors are beyond the control of management. This makes the execution of plans very

7. Psychological barriers :

Psychological factors also limit the scope of Some people consider present more important than future because present is certain. Such persons are psychologically opposed to planning. But it should not be forgotten that dynamic mangers always look ahead. Long-range wellbeing of the enterprise cannot be achieved unless proper planning is done for future.

Measures To Overcome Limitations of Planning

Some people say that planning is a mere ritual in the fast changing environment. This is not a correct assessment on managerial planning. Planning may be associated with certain difficulties such as non-availability of data, lethargy on the part of the planners, rigidity of procedures, resistance to change and changes in external environment. But these problems can be overcome by taking the following steps :

1. Setting Clear-cut Objectives :

The existence of clear-cut objectives is necessary for efficient planning. Objectives should not only be understandable but rational The overall objectives of the enterprise must be the guiding pillars for determining the objectives of various departments. This would help in having coordinated planning in the enterprise.

2. Management Information System :

An efficient system of management information should be installed so that all relevant facts and figures are made available to the mangers before they perform the planning function. Availability of right type of information will help in overcoming the problems of complete understanding of the objectives and resistance to change on the part of the subordinates.

3. Carefully Premising :

The planning premises constitute a framework within which planning is done. They are the assumptions of what is likely to happen in future. Planning always requires some assumptions to be made regarding future happenings. In other words, it is a prerequisite to determine future settings such as marketing, pricing, Government policy, tax structure, business cycle, etc. before giving the final shape to the overall business plan. Due weightage should be given to the relevant factors at the time of premising. It may be pointed out that the premises which may be of strategic significance to one enterprise may not be of equal significance to another because of size, nature of business, nature of market, etc.

4. Business Forecasting :

Business is greatly influenced by economic, social, political and international The management must have a mechanism of forecasting changes in such environment. Good forecasts will contribute to the effectiveness of planning.

5. Dynamic Managers :

The persons concerned with the task of planning should be dynamic in outlook. They must take the required initiative to make business forecasts and develop planning premises.

A manager should always keep in mind that planning is looking ahead and he is making plans for future which is highly uncertain.

6. Flexibility :

Some element of flexibility must be introduced in the planning process because modern business operates in an environment which keeps on For achieving effective results, there should always be a scope to make necessary addition, deletion, or alternation in the plans as is demanded by the circumstances.

7. Availability of Resources :

Determination and evaluation of alternatives should be done in the light of resources available to the Alternatives are always present in any decision problem. But their relative plus and minus points are to be evaluated in the light of the resources available. The alternative which is chosen should not only be concerned with the objectives of the enterprise, but also capable of being accomplished with the help of the given resources.

8. Cost-Benefit Analysis :

The planners must undertake cost-benefit analysis to ensure that the benefits of planning are more than the cost involved in This necessarily calls for establishing measurable goals, clear insight to the alternative courses of action available, premising reasonable and formulation of derivative plans keeping in view the fact that environment is fast changing.

Basic Principles Of Planning

The important principles of planning are as follows:

1. Principle of contribution to objective :

The purpose of plans and their components is to develop and facilitate the realization of organizational aims and Long-range plans should be interwoven with medium-range plans which, in turn, should be meshed with short-range ones in order to accomplish organizational objectives more effectively and economically.

2. Principle of limiting factors :

Planning must take the limiting factors (manpower, money, machines, materials, and management) into account by concentrating on them when developing alternative plans, strategies, policies, procedures and standards.

3. Principle of pervasiveness of planning :

Planning is found at all levels of management. Strategic planning or long-range planning is related to top management, while intermediate and short-range planning is the concern of middle and operative management respectively.

4. Principle of navigational change :

This principle requires that managers should periodically check on events and redraw plans to maintain a course towards a desired goal. It is the duty of the navigator to check constantly, whether his ship is following the right direction in the vast ocean to reach the distinction as scheduled. In the same way, a manager should check his plans to ensure that these are processing as required. He should change the direction of his plans if he faces unexpected events. It is useful if plans contain an element of flexibility. It is the responsibility of the manager, to adapt and change the direction of plans, to meet the challenge of constantly changing environment that could not be foreseen.

5. Principle of flexibility :

Flexibility should be built into organizational plans. Possibility of error in forecasting and decision- making and future uncertainties is the two common factors which call for flexibility in managerial planning. The principal of flexibility states the management should be able to change an existing plan because of changes in environment, without due cost or delay, so that activities keep moving towards established goals. Thus, an unexpected slump in demand for a product will require change in sales plan as well ass production plan. Change in these plans can be introduced, only when these possess the characteristics of flexibility. Adapting plans to suit future uncertainties or changing environment is easier if flexibility is an important consideration while planning.

Categories and Levels of Planning

  Planning can be classified on different bases which are discussed below :

1. Strategic and Functional Planning :

In strategic or corporate planning, the top management determines the general objectives of the enterprise and the steps necessary to accomplish them in the light of resources currently available and likely to be available in the Functional planning, on the other hand, is planning that covers functional areas like production, marketing, finance and purchasing.

2. Long-range and short-range planning :

Long-range planning sets long-term goals of the enterprise and then proceeds to formulate specific plans for attaining these goals. It involves an attempt to anticipate, analyze and make decisions about basic problems and issues which have significance reaching well beyond the present operating horizon of the enterprise. Short-range planning, on the other hand, is concerned with the determination of short-term activities to accomplish long-term with the determination of short- term activities to accomplish long-term objectives. Short range planning relates to a relatively short period and has to be consistent with the long-range plans. Operational plans are generally related to short periods.

3. Adhoc and Standing Planning :

Adhoc planning committees may be constituted for certain specific matters, as for instance, for project But standing plans are designed to be used over and over again. They include organizational structure, standard procedures, standard methods etc.

4. Administrative and Operational Planning :

Administrative planning is done by the middle level management which provides the foundation for operative plans. Operative planning, on the other hand, is done by the lower level mangers to put the administrative plans into action.

5. Physical Planning :

It is concerned with the physical location and arrangement of building and equipment.

6. Formal and Informal Planning :

Various types of planning discussed above are of formal They are carried on systematically by the management. They specify in black and white the specific goals and the steps to achieve them. They also facilitate the installation of internal control systems. Informal planning, on the other hand, is mere thinking by some individuals which may become the basis of formal planning in future.

Levels of Planning

In management theory it is usual to consider that there are three basic level of planning, though in practice there may be more than three levels of management and to an extent there will be some overlapping of planning operations. The three level of planning are as under :

1. Top Level Planning :

Also known as overall or strategic planning, top level planning is done by the top management, i.e. board of directors or governing It encompasses the long-range objectives and policies of organization and is concerned with corporate results rather than sectional objective. Top level planning is entirely long-range and is inextricably linked with long-term objectives. It might be called the ‘what’ of planning.

2. Second Level Planning :

Also known as tactical planning, it is done by middle level mangers or department heads. It is concerned with ‘how’ of planning. It deals with deployment of resources to the best It is concerned mainly, but not exclusively, with long- range planning, but its nature is such that the time spans are usually shorter than those of strategic planning. This is because its attentions are usually devoted to the step by step attainment of the organization’s main objectives. It is, in fact, oriented to functions and departments rather than to the organization as a whole.

3. Third Level Planning :

Also known as operational or activity planning, it is the concern of department managers and It is confined to putting into effect the tactical or departmental plans. It is usually for short-term and may be revised quite often to be in tune with the tactical planning.

Essential Steps in Planning

Planning is a process which embraces a number of steps to be taken. It is an intellectual exercise and a conscious determination of courses of action. Therefore, it requires a serious thought on numerous factors necessary to be considered in making plans. Facts are collected and analyzed and the best out of all is chosen and adopted. The planning process, valid for one organization and for one plan, may not be valid for all other organizations or all types of plans, because various factors that go into planning process may differ from organization to organization or plan to plan. For example, planning process for a large organization may not be the same as for a small organization.

The steps generally involved in planning are as follows :

1. Establishing Verifiable Goals or Set of Goals to be Achieved :

The first step in planning is to determine the enterprise objectives. These are most often set by upper level or top managers, usually after a number of possible objectives have been carefully considered. There are many types of objectives managers may select: a desired sales volume or growth rate, the development of a new product or service, or even a more abstract goal such as becoming more active in the community. The type of goal selected will depend on number of factors: the basic mission of the organization, the values its managers hold, and the actual and potential ability of the organization.

2. Establishing Planning Premises

The   second    step    in planning is to establish planning premises, i.e. certain assumptions about the future on the basis of which the plan will be intimately Planning premises are vital to the success of planning as they supply economic conditions, production costs and prices, probable competitive behaviour, capital and material availability, governmental control and so on.

3. Deciding the planning period

Once upper-level managers have selected the basic long-term goals and the planning premises, the next task is to decide the period of the Business varies considerably in their planning periods. In some instances plans are made for a year only while in others they span decades. In each case, however, there is always some logic in selecting a particular time range for planning. Companies generally base their period on a future that can reasonably be anticipated.

Other factors which influence the choice of a period are as follows: :

• lead time in development and commercialization of a new product;
• time required to recover capital investments or the pay back period; and
• length of commitments already made.

4. Findings Alternative Courses of Action :

The fourth step is planning is to search for and examining alternative courses of action. For instance, technical know-how may be secured by engaging a foreign technician or by training staff abroad. Similarly, products may be sold directly to the consumer by the company’s salesmen or through exclusive There is seldom a plan for which reasonable alternatives do not exit, and quite often an alternative that is not obvious proves to be the best.

5. Evaluating and Selecting a Course of Action :

Having sought alternative courses, the fifth step is to evaluate them in the light of the premises and goals and to select the best course or courses of This is done with the help of quantitative techniques and operations research.

6. Developing Derivative plans :

Once the plan has been formulated, its broad goals must be translated into day-to-day operations of the Middle and lower-level managers must draw up the appropriate plans, programmes and budgets for their sub-units. These are described as derivative plans. In developing these derivative plans, lower-level managers take steps similar to those taken by upper-level managers – selecting realistic goals, assessing their sub-units particular strength and weaknesses and analyzing those parts of the environment that can affect them.

7. Measuring and Controlling the Progress :

Obviously, it is foolish to let a plan run its course without monitoring its progress. Hence the process of controlling is a critical part of any plan. Managers need to check the progress of their plans so that they can (a) take whatever remedial action is necessary to make the plan work, or (b) change the original plan if it is unrealistic.

Types of Plans

1. standing or repeated use plan.

These plans are prepared by managers at different levels. They are intended for repeated use and are designed to deal with recurring problems. When a particular and familiar problem arises, a standing plan provides a ready guide to action. They form one of the important means for building predictable patterns of behaviour in a business firm. When a group of people live together or work together, they must be able to anticipate each other’s action. This is especially necessary for interdependent activities which require such ability to anticipate.

a.    OBJECTIVE:

Effective management implies management by objective. Objectives are goal established to guide of the enterprise. So, all planning work must spell out in clear terms the objectives to be realized from proposed business activities.

b.   POLICIES:

Planning also requires laying down of policies for the easy realization of the objectives of business. Policies provide a standing answer to recurring questions and problems. They are basic guides to action.

c. PROCEDURES AND METHODS:

Objectives and policies will lose much of their significance, if the planning is cannot lay down the procedure and methods for work performance. Procedures will indicate and outline a series of task for a specific course of action. Method is the manner of work performance and follows the set procedures.

A rule specifies necessary course of action in respect of a situation. It acts as a guide and is in the nature of a decision made by the management. This decision lays down what is to be done and what is not to be done In a particular situation. The rules prescribe a definite and rigid course of action without any scope for deviation or discretion entails penalty.

e. STRATEGY:

They are device formulated from the competitive standpoint by being fully informed somehow about the planning secrets of the competitors. They are a kind business spying and are applied as the situation demands. So, the success of the plan requires that it should be strategy oriented.

2. SINGLE – USE OR OPERATING PLANS:

Standing plan established a structure of customary behaviour for the desired results. They are highly useful devices for managerial decision-making. However, besides these standing plans, a manager can resort to single- use plans to decide in advance the action to be taken to meet a particular problem or a problems arising within a given period. Once the problem is over or met or the time is passed, a new plan is devised for the next period or problem. This type of planning is called single-use plans.

a. PROGRAMMES:

Programmes are precise plans of action followed in proper sequence in accordance with objectives, policies and procedures. Thus, a programme lays down the principle steps to be undertaken to accomplish an objective and sets an approximate time for its fulfillment. A programme may accordingly be a major or a minor one, a long-term one or a medium or short-term one. It is included in a single-use plan because it will not be used in the same form once its task is over.

b. BUDGETS:

Budget estimates the men, money, material and equipment, in numerical terms, required for the implementation of plans and programmes. It covers a particular period and when the period is over, a fresh budget comes into being. Budget, thus, is the main instrument of a single-use plan.

c. PROJECTS:

A project is particular job that need to be done in connection with a general programme. So, a single step in a programme is set up a project. A period has a distinct object and a clear cut termination.

So, it is include In a single-use plan. The task of management is made easier by setting up the work in a project.

3. CONTINGENCY PLANS:

Contingency plans as the name suggest are the plans which are formulated in some contingency. The plan is short term and time is deciding factor in the implementation of this plan. These are most important and prior in nature. Decision taken during this is generally non- programmed but some time programmed decisions are also taken. Organizations usually plan in advance to face any contingency to avoid chance to bear losses. These plans are extremely risky in nature.

EXAMPLE: In most organization contingency fund and contingency stock of inventory are maintained in advance in order to face any contingency in a near future. Sometimes government makes some plans to control the market price of the commodity in contingency like natural calamities like earthquake, flooding etc. And manmade contingencies like strikes, wars, and riots etc.

Planning Process

1. perception of opportunities:.

Perception of opportunities is not strictly a planning process. However, this awareness is very important for planning process because it leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans. From this point of view, it can be considered as the beginning of planning process. Perception of opportunities and the ability to see them clearly and completely, knowledge of where the organization stands in the light of its strengths and weaknesses, an understanding of why the organization wants to solve uncertainty, and a vision of what it expects to gain.

1. ESTABLISHING OBJECTIVES:

At this stage, major organizational and unit objectives are set. Objectives specify the results expected and indicate the end points of what is to be done, where the primary emphasis is to be placed, and what is to be accomplished by the various types of plans.

2. PLANNING PREMISES:

After determination of organizational goals, the next step is establishing the planning premise that is the condition under which planning assumptions – the expected environmental and internal condition. Thus planning premises are external and internal. External premises includes total factor in task environment like political, social, technological, competitors plans and actions, government policies, etc. Internal factors include organizations policies, resources of various types and the ability of the organization to withstand the environmental pressure.

3. IDENTIFICATION OF ALTERNATIVES:

Based on the organizational objectives and planning premises, various alternatives can be identified. The concepts of various alternatives suggest that a particular objective can be achieved through various actions.

EXAMPLE: If an organization has set its objectives to grow further, it can be achieved in several ways like expanding in the same field of business or product line, diversifying in other areas, joining hands with other organizations, or taking over another organization and so on.

4. EVALUATION OF ALTERNATIVES:

Various alternatives which are considered in terms of preliminary criteria may be taken for detailed evaluation. At this stage, an attempt is made do evaluated how each alternative contributes to the organizational objectives in the light of its resources and constraints.

1.  CHOICE OF ALTERNATIVE:

After the evaluation of various alternatives, the fit one is selected. Sometimes evaluation shows that more than one alternative is equally good. In such a case, a planner may choose more than one alternative. There is another reason for choosing more than one alternative. Alternative course of action is to be undertaken in future which is not constant. A course of action chosen keeping in view the various planning premises may not be the best one if there is change in planning premises. Therefore, planner must be ready with the alternative, normally knows as contingency plan, which can be implemented in changed situations.

2. FORMULATION OF SUPPORTING PLANS:

After formulating the basic plan, various plans derived so as to support the main plan. In an organization there can be various derivative plans like planning for buying equipments, buying raw materials, recruiting and training personnel, developing new product, etc. these derivative plans are formulated out of the main plan and therefore, they support it.

3. ESTABLISHING SEQUENCE OF ACTIVITIES:

After formulating basic and derivative plans, the sequence of activities is determined so that plans are put into action. Based on plans at various levels, it can be decided who will do what and at what time. Budgets for various periods can be prepared to give plans more concrete meaning for implementation.

Planning has a primacy over other management functions and is a pervasive element in organizations. It involves the major activities such as setting objectives, determining policies and making decisions. Planning is a higher order mental process requiring the use of intellectual faculties, imagination, foresight and sound judgement. By planning managers minimize uncertainty and help focus the sight of their organization on its goals.

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Planning is considered the first primary function of management. In this function, managers define the organizational goals and allocate resources of the organization to achieve such goals. So planning will also define all the future functions of management. Let us study it further.

• Introduction, Meaning, Importance, Features & Limitations of Planning
• Planning Process
• Types of Plan

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What is Planning?

Planning enables management to command the future rather than being swept away by future. In a fast changing environment the need for planning is all the more important because risk and uncertainty increase. In such an environment contingent plans can be prepared.

A plan may be defined as detailed course of action designed today to do something tomorrow. Thus, planning is an intellectual attempt by a manager to anticipate the future for better organisational performance.

Planning is a primary management function which every organisation has to undertake irrespective of its size, nature and origin.

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

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Learn about:-

1. Introduction to Planning 2. Definitions of Planning 3. Nature 4. Importance 5. Types 6. Features 7. Levels 8. Approaches 9. Process 10. Principles 11. Advantages 12. Limitations 13. Measures.

What is Planning? – Definitions, Nature, Importance, Types, Features, Process, Approaches, Levels and Other Details

What is planning – introduction.

It is often remarked that ‘Planning is a mere ritual in a fast changing environment’. This statement implies that in a highly turbulent and competitive environment planning becomes an empty academic exercise. Rapid changes in the economic and non-economic environment of business reduce the effectiveness of plans.

It becomes difficult for the planners to accurately forecast future conditions. Planning premises or assumptions may have a low degree of accuracy. The reliability of plans is open to doubt when the environmental forces are not stable.

Uncertainty and unpredictability of environment reduce the usefulness of planning in a turbulent environment planning becomes a more time-consuming and expensive exercise. Even the best laid planning may become redundant when the assumptions and forecasts on which the plans are based turn out to be different. Plans have to be revised again and again in a highly volatile environment. The plans might fail to guide the destiny of the organization.

It is true that a last changing environment reduces the accuracy and reliability of planning. But planning in advance is better than reacting to the environmental crisis as and when they arise. When events are left to chance the organization has no guide and cannot survive environmental threats. Through planning, it can search for and prepare itself to meet the contingencies and challenges.

Koontz and O’Donnell have suggested the following measures for making planning more effective in a fast changing environment:

(a) Planning must not be left to chance. Rather a climate conducive to planning should he created.

(b) Planning must start at the top, initiative and support of top management is essential for effective planning.

(c) Planning must be organized for wider participation in the formulation and execution of plan.

(d) Goals, premises and policies must be properly communicated.

(e) Long-range planning must be integrated with short range planning.

(f) Planning must include awareness and acceptance of change.

(g) An open system approach involving continuous monitoring of environment should be adopted.

What is Planning – Definitions

Planning is the first as well as most crucial function of management and is considered as a foundation to all other functions of management. It is symbolic to ‘looking ahead’ as is a process of chalking out future plan of action to be followed. In simple sense, it is an act or process of making plans such as – objectives, policies, procedures and strategies.

A plan may be defined as detailed course of action designed today to do something tomorrow. Thus, planning is an intellectual attempt by a manager to anticipate the future for better organisational performance. Planning is a primary management function which every organisation has to undertake irrespective of its size, nature and origin.

To have organisational effectiveness, the first prerequisite is that people should know what and when things are expected from them. For this purpose, planning comes as a solution whereby managers define broad objectives of organisation which are broken into departmental plans and then finally operational plans and budgets. In a way, planning provides a blueprint of functioning of an organisation aiming at attainment of organisation objectives. Effective planning is a prelude for effective functioning of every other function of management.

Few Definitions of Planning:

Being the starting point in managerial functions, broadly speaking, planning is concerned with determining various courses of action in the light of organisational objectives and premises and then selecting the best possible alternative.

As a function of management, planning has been defined by various authors. Few of them are presented below:

Koontz and O’Donnell – “Planning is deciding in advance what to do, when to do, how to do and who is to do it. It is bridging the gap from where we are to where we want to go.”

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

Louis A. Allen – “Management planning involves the development of forecasts, objectives, policies, programmes, procedures, schedules and budgets.”

Urwick – “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses.”

Weihrich and Koontz – “Planning is an intellectually demanding process; it requires that we consciously determine courses of action and base our decisions on purpose, knowledge and considered estimates.”

What is Planning – Nature

There are number of ways available to complete a certain job. Planning chooses any one of the best alternatives out of the available ones. Economy and certainty are considered while selecting the best alternative.

Thus, the nature of planning is briefly discussed below:

1. Primary of Planning:

The functions of management include planning, organising, staffing, directing and controlling. Eminent writers may add other new ones to these functions or those which have not been included in these functions. Anyway, writers unanimously accept that planning is the primary function of all the other functions. The reason is that the manager wants to achieve the pre-determined objectives in a better way.

2. Planning Contributes to Objectives:

There is a close connection between objectives and planning. Planning is based on the objectives. If there is no link between planning and objectives, the former will only be a mental exercise and of no use. Planning contributes to the attainment of objectives.

3. Planning an Intellectual Activity:

Planning includes the selection of the best alternative available and thinking before selection of the best alternative. It involves the ability to foresee mishaps in future which might affect the smooth functioning of an organisation. So, planning is an intellectual activity.

4. Planning Results in Higher Efficiency:

Planning efficiency is measured in terms of input and output ratios. Planning leads to maximum output with minimum expenditure. This input and output relationship is not only determined by money, labour hours and production units but also by the degree of satisfaction available to the individual as well as the group. The high degree of human satisfaction motivates the workers to produce more within the specified time.

5. Planning is a Continuous Process:

Planning does not come to an end with the establishment of a business concern. Planning in other functions is also required. After the establishment of a business concern, certain decisions are taken. Planning is necessary to implement the decisions. A number of decisions are taken during the life time of the business concern. So, planning is necessary throughout the running of the business concern as a continuous process.

6. Planning is Flexible:

While planning, any one of the available alternatives is selected. Planning selects the best alternative based on certain assumptions. If the assumptions are proved wrong, the selected alternative tends to be an incorrect one. There is a possibility of a dead log in the functions of the management. Planning has one more alternative to suit future situations.

7. Unity and Consistency:

Every department manager resorts to planning at different times. The planning is related to the achievement of objectives. In other words, managerial actions of different managers are unified in order to achieve the objectives. Policies and procedures of the organisation provide a basis for the consistency of executive behaviour and action in matters of planning.

8. Planning is Common to All:

Planning work is done by every person who is working in a business unit. He may be a managing director or a foreman.

Being of a higher place, the planning for a managing director is to frame the policies and procedures to be adopted. Being at a lower place, planning for a foreman is to allocate the work to his subordinates. So, planning is common to all.

9. Basis for All Managerial Functions:

Planning is found at all levels of management. Top management looks after strategic planning. Middle management looks after administrative planning and the lower level management looks after operational planning.

10. Getting Co-Ordination:

Planning co-ordinates various business activities. Without planning, nothing can be co-ordinated.

11. Considering Limiting Factors:

Every plan is formulated after considering the limiting factors. The limiting factors may be money, skilled labour, quality materials, plant and machinery.

What is Planning – Importance

Planning is the first and foremost essential activity in all organisation. It helps in determining and achieving the objectives of the organisation. The sound planning is important condition for effective management.

It helps the organization in the following ways:

1. Making Objectives Clear:

It makes objectives clean, clear, and specific, it also serves as guide for deciding what action should be taken in present and future conditions.

2. Planning Provides Direction:

Planning helps the organisation to keep on the right path. It provides definite direction to manager to decide what to do and when to do it.

3. It Reduces Risk and Uncertainty:

It helps organisation to predict future events and prepare to take necessary actions against unexpected events. It is helpful in assessing and meeting future challenges. As per view of Peter F. Drucker, “Planning enables a manager to affect rather than accept the future”.

4. Planning is Economical:

As per views of Koontz and O’ Donnell,” Planning substitutes jointly directed effort against uncoordinated, piecemeal activity, an even flow of work for an uneven flow, and deliberate decisions for snap judgments”. The effective plans coordinate organisational work and economical.

5. Planning Provides the Basis for Control:

Planning provides the standard against which the actual performance can be measured and evaluated. There is nothing to control without planning and without proper control. Plans serve as yardsticks for measuring performance.

6. Planning Facilitates Decision Making:

Planned targets serve as the criteria for the evaluation of different alternatives so that the best one may be chosen with the help of planning hasty decisions and random actions can be avoided.

7. Planning Improve Efficiency of Operations:

It is rational activity that leads to efficient and economical operations, planned action is always better than unplanned. Planning makes the task of managing more efficient and effective manner. It helps to minimize the cost of operations and improves the competitive strength of an organisation.

8. Planning Improves Morale:

If the role of employee is cleared and well defines goals, then the employee feels highly motivated and contribute his full potential towards accomplishment of objectives. Planning improves the behavioural climate in the organisation and reduces the friction between departments.

9. Effective Co-Ordination:

According to Koontz and O’ Donnell “Plans are selected courses along with the management desires to coordinate group action.” The effective coordination integrates the physical and human resources between departments.

10. Planning Encourages Innovation and Creativity:

Planning compels the managers to be creative and innovative all the time. It forces managers to find out new and improved ways of doing things in order to remain competitive and avoid the threats in the environment.

What is Planning – Classification of Plans : Based on Importance, Time, Level, Formality and Approach

Plans can be classified based on importance, period of planning, level, for­mality, and approach.

1. Based on Importance:

Plans can be strategic, tactical, or operational. Strategic plans are important, future-oriented plans that form the hub of fulfilling the vision. Usually, they concern the entire organisation. Tactical plans are required to implement strategic plans. Examples, are redesigning the shop floor layout or closing a few non-performing out­lets of a retail chain.

Operational plans are related to day-to-day func­tioning such as production, delivery, or purchase operation. Take for instance, the plan of Precision Connectors to deliver connectors to the two-wheeler manufacturer, which is an illustration of operational plans.

2. Based on Time:

Plans can be short, medium, or long term. Short term usually refers to plans of one year or less; medium term, to two to five years; and long term, to five to 10 or even 20 years. It depends on the nature of the project. Some projects such as building the Metro in Mumbai or Bengaluru may have a short-term plan that covers 50 km of Metro in five years; a medium- term plan that covers 200 km in 10-12 years, and a long-term plan that covers 300 or 400 km of rail that in 20 to 30 years.

3. Based on Level:

A plan can be called corporate level, business level, or functional level plan. The Tatas entering the airlines business is an example of corporate-level plan and Precision Connectors becoming an OEM is an example of a business-level plan. Functional-level plans are made by departments, for example, a plan on how the marketing department will achieve its goals.

4. Based on Formality:

A plan can be formal or informal. It is formal when planning is done as per the defined steps and documented, and informal when the documentation is not very rigorous.

5. Based on Approach:

A plan can be called proactive when it is meant to meet an anticipated situation. For instance, a compensation plan based on a three-year salary negotiation is a proactive plan to ensure industrial peace. If the same compensation plan came up as a result of a flash strike, it would be a reactive plan. The former leads to growth and the latter helps to regain balance and to ensure survival.

What is Planning – 11 Main Features

Feature # 1. main focus on objectives:.

While goals are the broad, long-term accomplishments an organisation wishes to attain, objectives are specific, short-term statements detailing how to achieve the organisation’s goals. Planning specifies the objectives to be attained by an organisation in the future. It also lays down the steps to be followed to achieve the objectives. By determining the objectives planning provides clear directions and guidelines to an organisation’s activities — both current and future.

Feature # 2. Basic (Key) Function:

Planning is typically the starting point in the management process. To be successful, organisations need a great deal of planning. People in organisations need goals and the plans to achieve them. Planning lays the foundation for the whole management process. It makes an organisation efficient.

It helps in manpower planning and human resource development. It serves as the yardstick which can be used by the managers to exercise control over resources and activities.

Feature # 3. Universal (Pervasive) Function:

Planning is the basic function of managers at various levels of an organisation. The exercise is carried out by all three levels of managers — the upper, middle and lower. However, the nature, type and scope of planning is not the same at each managerial level. In most organisations upper- level and some middle level managers spend more time developing strategic, broad/directional, long-range and single-use plans for the organisation.

Other middle-level and all low-level managers, in contrast, spend more time specifying how the strategic plans will be accomplished by developing operational, narrow/ specific, short-range plans and implementing standing plans (i.e., policies, procedures and rules).

Feature # 4. Continuous (On-Going) Process:

Planning is a continuous process. A plan which worked yesterday may not be successful in today’s market. Most planning also follows a pattern. Old plans are to be revised and modified and new ones to be introduced as demanded by the needs of the situation for achieving organisational objectives. In today’s rapidly changing environment planning is becoming more and more difficult because changes are occurring so fast that plans — even those for just few months into the future — may soon be obsolete.

Feature # 5. Forward-Looking Nature:

Any planning exercise at the business level is a forward- looking-one. It is carried out to achieve certain objectives in the future. It involves forecasts of future demand, market competition and government policies. And business managers try to cope with future uncertainty effectively through proper planning.

Feature # 6. Decision-Making Aspect:

Decision-making is essentially a choice of an appropriate course of action from among alternatives. The process of planning involves searching for alternatives and choice of the best alternative from those which are available for achieving certain specified and pre-determined organisational objectives.

Thus decision-making is an inherent part of the planning exercise. For example, financial planning involves choice between bond (debenture) financing and equity financing of investment projects. Proper decision-making techniques are crucial for selecting the organisational goals, plans and strategic options.

Feature # 7. Mental Exercise:

Planning involves some sort of intellectual (brain storming) exercise. It requires a lot of thinking in advance, foresight and proper judgment on the part of management.

Feature # 8. Flexibility:

In today’s era of rapid changes in technology, market conditions and government policies, the planning process has to be flexible enough in order to enable managers to face and meet newer and newer challenges. Due to rapidly changing environment, some companies are making shorter-term plans which allow for quick responses to customer needs and requests. The goal is to be flexible and responsive to the market.

Feature # 9. Shared Responsibility:

Planning means that a manager must involve his subordinates actively in order to determine resource requirement, fix goals and identify and exploit opportunities. During the process, the manager may need to go outside the work unit for information about products, competitors, markets, and the like.

Feature # 10. Choice:

Planning involves choice. Planning is essentially an act of choosing from alternative courses of action. And choice involves decision-making. In truth, in order to make a rational choice, it is necessary to evaluate and compare the possible alternatives.

Feature # 11. Efficiency:

Planning seeks to promote efficiency. By helping to economise the use of scarce resources, sound planning leads to accomplishment of desired objectives in the best possible may, i.e., at the minimum possible cost. And this implies efficient operation which is the primary objective of a business.

What is Planning – Top 3 Levels : Strategic, Tactical and Operational Planning

Planning is ubiquitous – that is, it exists in the entire organisation. All levels in the organisation carry out the planning function, but in varying degrees. In other words, the scope and timescale of planning varies. Planning commences at the strategic or top level of the management.

Strategic planning commences with defining the purpose or mission of the organisation, establishing strategic priorities and formulating major policies. Strategic planning becomes the basis for successive levels of planning namely, tactical planning (at the middle level) and operational planning (at the lower level).

These are discussed in detail here:

1. Strategic Planning:

Strategic planning includes plans made by the top management to pursue long term goals with the resources likely to be available.

It involves:

i. Formulating a mission for the entire organisation.

ii. Identifying the business that helps to meet a mission.

iii. Determination of financial requirements.

iv. Working out authority relationships in terms of organisation structure.

v. Allocating resources effectively.

It has a time horizon of five years or more. The chief executive or chairman, members of the board, managing directors, and divisional heads (these constitute the top level management) take part in strategic planning.

2. Tactical Planning:

Tactical planning specifies how the mission of an organisation can be accomplished.

It involves the decisions in respect of:

i. Products or services to be added or deleted

ii. Size of capital investments required

iii. Pricing the products and services to be provided

iv. Facilities, methods and systems necessary

v. Withdrawing investments from, or closing down operations of unprofitable departments or products or services.

Tactical planning has a time horizon of six months to two years. It is done by the middle-level management, which comprises functional managers, product line managers and department heads. Tactical planning is also called intermediate planning.

3. Operational Planning:

Operational planning works out the basic details of how the specific tasks can be accomplished with the available resources.

It involves decisions in respect of:

i. Best suitable production methods.

ii. Effective marketing plans.

iii. Organisation structure in terms of customer, product or region etc.

iv. Facilities required in the office, factory, sales outlets etc.

The time horizon for operational planning is between one week to one month. Operational planning is carried out by lower-level management comprising unit managers, foremen, line supervisors etc.

What is Planning – 4 Important Approaches: Top- Down Approach, Bottom-Up Approach, Composite Approach and Team Approach

Following are the approaches to planning:

Approach # 1. Top-Down:

Under this approach, only echelons of management frame objectives, policies, strategies procedures and so on. Those at the other levels have little to say in the planning exercise, even though they are consulted in plan formulation. The plans made by the top brass are implemented by managers at middle and lower levels.

The approach assumes that only those at the top level have requisite skill, knowledge and authority to plan. Thus plans made reflect the values and visions of the top management. This approach is practised in family-run organizations and centralized organizational structure.

Approach # 2. Bottom-Up:

This is virtual reversal of top-down approach. Under this approach, plan proposals originate from supervisory management level and travels upwards. The top management limits itself only to issuing guidelines for planning. The lower level management evolves planning taking into account the ground reality.

The implicit belief under this approach is that those who are concerned with implementation of plans are more informed, more practical and the plans formulated by them reflect realism. Top management unifies all sub-corporate plans. This approach is called participative approach.

Approach # 3. Composite:

This is the blend of top-down and bottom- up approach. This approach gives broad guidelines and parameters to the line executives at middle and lower level management. It gives support, resources and freedom to evolve plans to middle and lower level managements. But the plans evolved are thoroughly reviewed and adjusted in consultation with other levels of management. This is semi- participative approach. This approach is suited to many organizations.

Approach # 4. Team:

This approach envisages granting autonomy to teams in the matter of planning and execution thereof. It fixes accountability on those empowered with resources and authority in respect of the results expected of them. The team comprising functional specialists is led by a team leader. He, in turn, empowers the members to evolve plans suitable to their area and fixes accountability for the results.

The team leader coordinates the sub-plan, and directs them towards accomplishment of team objectives. The team leader frequently conducts review meetings to ensure that plans are put through smoothly. Contemporary organizations have restructured their vertical organizations into flat organizations.

What is Planning – Process

It is difficult to specify the steps in the planning process for all organisations because of their differences in size and complexity. Nevertheless, it is possible to suggest some important steps for effective planning.

The process which are applicable to the most types of plans are discussed below:

Process # 1. Establishing Objectives:

Planning is an intellectual process which an executive carries out before he does any job with the help of other people. But while planning, the question which must arise in the mind of the executive is “what is the objective of doing the job?” So, the first step in planning is the determination of objectives. Objectives provide direction to various activities in the enterprise. Planning has no utility if it is not related to objectives.

The establishment of objectives can, at times, be more important than the objectives themselves since their establishment emphasizes how various people and units fit into the overall organisation framework. The formalisation of this process can also be used to motivate individuals to achieve objectives which they have helped to establish. Objectives clarify the tasks to be accomplished. Overall objectives define what is to be accomplished in general terms. The derivative objectives focus on more details, that is, what is to be accomplished, where action is to take place, who is to perform it, how it is to be undertaken, and when it is to be accomplished.

Process # 2. Collection of Information and Forecasting:

Sufficient information must be collected in order to make the plans and sub plans. Necessary information includes the critical assessment of the current status of the organisation together with a forward look at the environment that is anticipated. The assessment of external environment may consider the strong and weak points of the organisation. Collection of information and making forecasts serve as an important basis of planning.

Process # 3. Development of Planning Premises:

This step involves making assumptions concerning the behaviour of internal and external factors mentioned in the second step. It is essential to identify the assumptions on which the plans will be based. Assumptions denote the expected environment in the future and are known as planning premises.

Again, forecasting is important in premising. It helps in making realistic assumptions about sales, costs, prices, products, technological developments, etc. in the future. The assumptions along with the future forecasts provide a basis for the plans.

Since future environment is so complex and uncertain, it would not be realistic to make assumptions in greater details about every environmental factor. It is advisable to limit premising to those factors which are critical or strategic to the planning process.

Process # 4. Search of Alternatives:

Usually, there are several alternatives for any plan. The planner must try to find out all the possible alternatives. Without resorting to such a search, he is likely to be guided by his limited imagination. At the time of finding or developing alternatives, the planner should try to screen out the most unviable alternatives so that there are only a limited number of alternative for detailed analysis. It may be noted that determination of alternative plans can be a time consuming task because objectives which have been established initially may be found to be inflexible. It is also possible that the assumptions need revision in the light of the changed circumstances.

Process # . Evaluation of Alternatives:

Once alternative action plans have been determined, they must be evaluated with reference to considerations like cost, long-range objectives, limited resources, expected payback, risk, and many intangible factors to select the satisfactory course of action. Many quantitative techniques are available to evaluate alternatives.

The manager may take the help of these techniques to reach the most objective result. The best possible alternative may be chosen by the manager after detailed analysis. Sometimes, evaluation of available alternatives may disclose that two or more courses are advisable and so the concerned manager may decide to choose two or more alternatives and combine them to suit the requirements of the situation.

Process # 6. Selection of Plan and Development of Derivative Plans:

The final step in the planning process is to select the most feasible plan and develop derivative plans. The plans must also include the feedback mechanism. The hierarchy of plans must be both integrated and flexible to meet the changing internal and external environment.

The derivative plans are required to support the basic or overall plans because the latter cannot be executed effectively unless they are supported by the derivative or sub-plans. The derivative plans are developed within the framework of the basic overall plan. For instance, if an airline decides to acquire a fleet of new planes, it will be followed by the development of a host of derivative plans dealing with the employment and training of various types of personnel, the acquisition of spare parts, the installation of maintenance facilities, scheduling, advertising, financing and insurance.

What is Planning – 9 Main Principles

The principles of planning are as follows:

1. Goal Orientation:

A plan should be absolutely goal focused and adhere to the scope and time frame set by the goal.

2. Specificity:

Plans must be specific and should avoid generalities and non-verifiable statements/propositions such as ‘complete as early as possible’, ‘resources will be mustered in due course’, ‘using least resources’, and so on. Rather one should use terms such as ‘complete the task by 30 th April 2016′, ‘complete the task with an expense not more than Rupees 20 lakhs’ and so on.

3. Accuracy:

Plans are like maps, and we all know that an inaccurate map can lead us to the wrong place. For example, if Rajendra makes a plan to produce 1,000 connectors a day, it must be based on the number of connectors a person/team can make per day and the number of peo­ple/teams available.

4. Comprehensiveness:

If plans leave some blanks, either there will be confusion due to different interpretation, or there will be delay for clarifications.

5. Flexibility:

As the execution of the plan progresses, there will be changes to the external environment, internal environment, and resources. Plans must envisage these possible changes and cater for them from the beginning. For example, if you are building a mall and the contracting economy decreases demand, then you should have away to build part of it and open the business leaving the completion for better days to come.

6. Objectivity:

While selecting from various options available, you should be objective. When quantitative parameters are used, the data should be fair and impartial, and when qualitative parameters are used, individual bias should not creep in.

7. Simplicity:

Plans are implemented by several people and more impor­tantly by people who may not be as smart as the planners. Therefore, each part of a plan must be simple, the parts of a plan must be easily connectible, and the overall plan should be simple for everyone to un­derstand and implement.

For example, if you have to set up a chain of coffee shops, the design of each shop should be simple, resources that would be shared such as purchase, promotion, and so on, should also be simple for everyone to understand and manage.

8. Communicability:

A plan needs approval from internal and external agencies. For example, Rajendra’s plan to make connectors as an OEM supplier for two wheelers would need acceptance by internal teams, funding approval from the bank, and approval related to production, quality assurance, and purchase from the two-wheeler company. Hence, it should not be vague, but should be in an easily communicable format.

9. Implementable:

This implies that there should not be any external envi­ronmental restrictions to implement the plan. Coca Cola had a bottling plant in Plachimada in Kerala, India. Most bottling plants need copious water, and ground water is a practical source. Plachimada had plenty of water and there is no national law against using it.

Coca Cola planned to establish a bottling plant at Plachimada. The problem they faced was that the use of ground water affects the neighbourhood and the socially aware neighbourhood brought the operations to a halt. Would the fact that there is no law to prevent the company from using ground water, and that it returned more water to the nature than it used, through various means make the plan implementable? The moot point is that what is permissible may not be implementable.

What is Planning – 18 Main Advantages

Planning helps the organisation achieve its objectives early. In this way, planning helps the organisation in many ways.

Some of the advantages of planning are briefly explained below:

1. Better utilisation of resources – Planning decides what to produce and how to produce. Then, there is the possibility of utilising the resources effectively.

2. Helps in achieving objectives – Planning sets goals or objectives of an organisation. This gives effective direction to the control of employees of the organisation. In this way, planning helps the organisation accomplish the pre-determined goals or objectives.

3. Economy in operation – Unnecessary production, ineffective utilisation of resources and unnecessary activities of an organisation are eliminated through planning. This results in the economy of operations.

4. Minimises future uncertainties – The uncertain future increases the importance of planning. Planning foresees the changes and uncertainties taking shape in future and devices methods to face them. Some future uncertainties are thus, minimised through planning.

5. Improves competitive strength – Competitive strength is improved by adding new line of products, changes in quality and size of the product, expansion of plant capacity and changes in methods of work. These are achieved through planning.

6. Effective control – Control without planning is an impossible one. Control is used only when there is a well-chalked out plan. So, planning provides a basis for controlling.

7. Motivation – A well-prepared plan encourages the employees of an organisation and gives them a sense of effective participation. Planning motivates the employees as to what the organisation wants to achieve and defines it to the employees.

8. Co-operation – Planning helps the management pulls the individual to achieve common objectives or goals. Planning provides well-defined objectives, unity of direction, well-published policies, procedures and programmes. All these facilitate to get co-ordination, which consequently avoids duplication of work and interdepartmental conflicts.

9. Promote growth and improvement – Planning sets a standard to control purpose. So, useless and aimless activities are avoided. It leads to the growth and improvement of an individual and the organisation.

10. Develops rationality among management executives – Disciplined thinking of management executives is geared up through formal planning. Management executives take action only after putting their thoughts in blueprint. In this way, planning brings rational thinking and approach among management executives.

11. Prevents hasty judgment – We can analyse a problem through a plan and consider the alternatives before taking a sound decision. It is possible to plan in advance as to what will be done and how it will be done. This process avoids hasty judgment.

12. Reduces red-tapism – junior most executive can act according to pre-planned decisions. There is no need for him to get any fresh permission for his action. It saves time, energy and cost and reduces red-tapism.

13. Encourages innovative thought – A good plan should provide a basis for new thinking in any individual. It seeks a way to encourage people to co-ordinate and to achieve common objectives. According to D.E. Hussey “A good planning process will provide avenues for individual participation, will throw up more ideas about the company and its environment, will encourage an atmosphere of frankness and corporate self-criticism and will stimulate managers to achieve more.”

14. Improves ability to cope with change – Planning helps managers improve their ability to cope with changes but it cannot prevent changes from happening. This creates an awareness among the managers regarding the incidence of change.

15. Creates forward looking attitude in management – Managers may lose their prosperity facing day to day problems. Planning helps a manager to become more prosperous and creates a forward looking attitude in him, thus such a planning ensures stability to management.

16. Development of efficient methods – Planning helps the management develop efficient methods and procedures of action.

17. Delegation of authority facilitated – A well-prepared plan will always facilitate the delegation of authority.

18. Anticipation of crisis – Careful planning will avoid the crisis which is likely to occur. In this way, management can reduce the internal organisational disturbances.

What is Planning – 9 Major Limitations

Planning has various limitations. This is why it becomes less effective in most cases, if not completely ineffective.

The following points are observed in this context:

1. Lack of Flexibility:

Plans lay down a specified course of action regarding the future, which cannot be changed even if situations so demand. This often proves to be costly for the organisation, particularly when there is need for a change in the actual course of action. And this is why some progressive firms now rely on contingency planning. The object is to overcome crisis situations as and when they arise.

2. Lack of Creativity and Initiative:

Due to inherent rigidity of the plans managers lack the initiative to do new things or to venture out in new directions to cope with changes in the environment. So even advance thinking by managers does not lead to the generation of new ideas. And creative thinking or creativity is out of question.

3. Environmental Uncertainty:

At times planning loses its practical relevance due to various uncertainties surrounding the environment. So managers cannot fully rely on existing plans. They have to revise or modify existing plans or change their strategies to get the desired results even in adverse situations. For instance, a company might be required to revise its advertisement budget to maintain competitive parity, i.e., to match the efforts of its major and nearest rivals.

4. Time Lag:

Planning which involves several steps such as – defining objectives, collecting and analysing data and choosing from alternatives is a time-consuming and lengthy exercise. It loses effectiveness due to delay in taking necessary action. In other words, planning loses its relevance in situations which demand quick decision(s) and immediate action(s).

5. Costly Process:

Planning is also a costly exercise. Since management is a valuable resource, the cost of planning varies directly and proportionately with the time managers devote to planning. If managers do not devote sufficient time to planning, their decisions may prove to be impractical or wrong.

6. No Guarantee for Action:

A plan is just a programme of action regarding the future, not a guarantee for action. The success of planning depends on its effective implementation. The effectiveness of planning depends on the outlook and the actual behaviour of the planners. Planning makes managers feel secured. So they just want to maintain the status quo. They just try to fulfill the requirements of existing plans rather than improving their performance or venturing out in new directions.

7. Inaccurate Forecast:

Planning is based on the timely availability of reliable and complete information and accuracy of forecasts of demand, price and technology. If forecasts are based on incomplete information or if the forecasting method is not reliable, then plans are bound to be ineffective or likely to fail.

8. Time Constraint:

Planning requires a manager to set aside necessary time to do it. Managers who have very busy schedules may react adversely when superiors order them to prepare a 5-year plan for their work unit. The reason is that they are expected to do this and still find time to meet the current year’s target. However, the time for planning has to be found. Otherwise, managers will just react to events.

9. Internal and External Constraints:

In spite of Internet connections and speedy access to computer databases, every manager cannot use available information to make an intelligent decision. The caliber of employees he needs may not be immediately available at the salary he is willing to pay. A competitor may quickly enter his market with a more attractive product. A change in buying habits of consumer may occur.

An important supplier may let him down. Rapid technological progress may make his machines and equipment obsolete overnight. And in any of these the manager will not have the time to plan a decision based on these internal and external constraints (over which he has not much control). Nevertheless a plan need not be perfect to be executable. Often a manager has to make a decision based on an incomplete plan.

What is Planning – 10 Measures to Overcome Limitations

The following measures help to overcome the limitations of planning:

1. Scientific Selection of Goals:

Unwillingness to give up alternative goals can be overcome through scientific selection of goals. Managers should carry out cost-benefit analysis for each alternative and accept goals whose returns are greater than the costs.

2. Use of Mathematical Methods:

Fear of failure to achieve the goals can be removed by applying mathematical models to the goal selection process. These models help in accurate predictions and practical implementation of plans. Besides, managers should make flexible plans which be changed according to changing situations.

3. Sound Communication System:

Lack of knowledge can be overcome through a well-connected communication system where managers at all levels remain informed of the organisational activities. A well-developed management information system can solve this problem.

4. Forecasting :

Managers remain informed of the external environment through an effective system of communication. Regular contact with outside parties, through seminars and conferences provides information about the environment. In fact, the need for planning arises because of uncertainties in the environment. If everything could be forecast, there would be no need for planning. The need is to predict the environmental changes through forecasting techniques like time series, forecasts, causal models and other statistical methods. They help to know the environmental factors and their effect on organisational goals.

5. Develop Managerial Confidence:

The above measures develop confidence to build rational and realistic goals which are challenging but attainable. Important, overall organisational goals are set at the top level and goals lower in priority are framed by lower-level managers in consultation with the superiors.

6. Help Organisational Members to Accept Change:

Organisational members should realise that change is the essence of life and reduce resistance to change through the following measures-

(a) Managers should explain the causes and effects of change to organisational members. Members should know the benefits that accrue to them and the organisation because of changes in the current system of working.

(b) The existing benefits should be compared with future benefits that will accrue as a result of change and unwillingness of members to give up existing benefits should be removed.

(c) If members feel that plans have deficiencies and weaknesses, management should involve organisational members in framing the plans. Thus, members become aware of the effects of changes and minimise the impact of their weaknesses, if any.

7. Top Management Support:

Planning process should initiate at the top-level. Managers should keep in mind the barriers to planning and set realistic and attainable goals.

8. Setting Responsibility:

If responsibility is fixed for framing and implementing the plans, plans will be more realistic. Strategic plans should be the responsibility of top management, tactical plans should be the responsibility of middle-level managers and operating plans should be the responsibility of lower-level managers.

9. Encourage Group Participation:

Rather than framing and communicating plans to organisational members for implementation, top managers should encourage group participation where people frame and implement plans collectively in the planning process.

10. Prepare Contingency Plans :

Organisations operating in the dynamic and complex environment should prepare contingency plans which can be adopted if unpredicted situations occur.

Related Articles:

• Planning Process: 11 Major Steps of Planning (with diagram)
• What is Economic Planning?
• Features of Planning
• Features of Human Resource Planning

Strategy Implementation: Eight Key Concepts for Organizations

Implementing a robust business strategy is critical for organizations aiming to reach their long-term goals. While creating a strategic plan is important, successful execution is what truly determines an organization's success. Strategy implementation requires aligning all departments, managing resources effectively, and monitoring progress to ensure goals are achieved.

This guide will cover the key concepts of strategy implementation. By mastering these, organizations can enhance performance, adapt to market changes, and achieve their goals more efficiently.

Main Takeaways From This Article:

• Strategy implementation is essential for turning strategic plans into actionable steps, aligning resources, and ensuring organizational alignment.
• Effective implementation enhances organizational performance by focusing efforts, reducing inefficiencies, and fostering a culture of continuous improvement.
• Key components of successful strategy implementation include clear objectives, efficient resource allocation, well-defined processes, strong communication, and an adaptive organizational structure.
• Overcoming common challenges—such as unclear objectives, inadequate resources, poor communication, and resistance to change—is crucial for successful strategy execution.
• Spider Impact provides valuable tools to support strategy implementation, from tracking objectives to facilitating communication and ensuring accountability.

What Is the Strategy Implementation Process?

The strategy implementation process involves the actions and decisions organizations take to turn their strategic plans into reality. While the strategic planning process defines what an organization wants to achieve, implementation focuses on how to achieve those goals. This process turns strategic objectives into actionable steps, allocates resources, and ensures everyone in the organization is working toward the same goals.

Key aspects of the implementation process include:

• Translating Strategy Into Operational Terms: Break down broad strategic goals into specific, measurable objectives for teams and departments.
• Resource Allocation: Ensure the necessary resources—such as people, budget, and technology—are available and effectively distributed to support strategic initiatives.
• Execution: Carry out day-to-day activities that move the organization toward its goals.
• Monitoring and Control: Track progress continuously and make adjustments as needed to stay on course.

Successful strategy implementation requires a clear plan, strong leadership, effective communication, and a system for tracking progress and adapting to challenges.

The Importance of Strategic Implementation

Strategic implementation is the crucial step that turns a well-crafted plan into real results. Without it, even the most innovative strategies can fail.

Aligning Organizational Efforts

Effective implementation ensures that every department and team is working toward the same objectives. This alignment reduces duplicated effort, improves coordination across functions, and ensures efficient use of resources. When everyone is aligned, it’s easier to move the organization forward in a unified direction.

Achieving Strategic Goals

By turning objectives into actionable tasks, organizations can systematically achieve their goals. This involves setting clear milestones, tracking progress, and making adjustments as needed. Effective implementation makes strategic goals achievable with concrete steps to reach them.

Enhancing Organizational Performance

Strategy implementation boosts overall performance by focusing efforts on key objectives. By aligning all actions, organizations can optimize operations, reduce inefficiencies, and drive better results. This isn't just about hitting targets; it's about fostering continuous improvement and encouraging innovation to achieve success.

Monitoring and Adapting to Changes

The business environment is always changing, so strategies must adapt. Strategic implementation includes continuous monitoring and flexibility. By regularly assessing execution, organizations can identify areas for adjustment and pivot as needed. This adaptability is key to staying relevant and competitive in a constantly evolving market.

Key Components of The Strategic Implementation Process

Strategy implementation relies on several crucial components to bring a strategic plan to life. Here are the key elements:

The people within an organization are the most vital component of any strategy implementation. Leadership plays a critical role in guiding and motivating teams, while employees at all levels are responsible for executing the tasks that drive the strategy forward. Ensuring that the right people are in the right roles, and equipped with the necessary skills and knowledge, is fundamental to success. Additionally, fostering a culture of accountability and engagement among employees is crucial for maintaining momentum and achieving strategic objectives.

Resources, including financial, technological, and human resources, are the fuel that powers the strategic implementation process. Proper allocation of resources is essential to ensure that each aspect of the strategy has the necessary support to succeed. This involves not only budgeting and financial planning but also ensuring that the organization has access to the right tools, technology, and expertise. A strategic management process for resource utilization helps avoid bottlenecks and ensures that the strategy can be executed without unnecessary delays or obstacles.

Processes refer to the methods and procedures that guide how work is carried out within an organization. Well-defined processes are necessary for translating strategic objectives into actionable tasks. This includes setting up workflows, establishing timelines, and defining roles and responsibilities. Effective processes ensure that tasks are completed in a structured and efficient manner, reducing the risk of errors and ensuring that everyone is aligned with the strategic plan.

Communication

Clear and consistent communication is essential for a strategy's successful implementation. It ensures that everyone in the organization understands the strategy, their role in it, and how their work contributes to the overall goals. Effective communication channels, both top-down and bottom-up, are necessary to keep all stakeholders informed, engaged, and aligned. Regular updates, meetings, and feedback loops help maintain transparency and ensure that any issues or changes are communicated promptly.

Organizational Structure

The organizational structure defines how tasks are divided, coordinated, and overseen within an organization. A well-aligned structure supports the strategic plan by ensuring that there is clarity in roles, responsibilities, and reporting lines. It also facilitates collaboration across different departments, helping to break down silos and ensure that everyone is working toward the same objectives. An adaptive organizational structure can also make it easier to pivot and adjust the strategy as needed.

Organizational culture refers to the shared values, beliefs, and norms that influence how people behave within an organization. A culture that supports strategic implementation encourages innovation, collaboration, and a commitment to achieving strategic goals. It fosters an environment where employees feel empowered to take initiative, share ideas, and work together to overcome challenges. Aligning the culture with the strategy ensures that everyone is motivated and committed to the success of the implementation process.

Essential Concepts for Effective Strategy Implementation

Successful strategy implementation relies on key concepts that guide the process from strategy formulation to execution. For every new strategy that's developed, these principles help set clear goals and take actions that lead to measurable success.

Setting Clear Objectives

Establishing clear, well-defined objectives is the first step in effective strategy implementation. These objectives should be specific, measurable, and directly aligned with the organization's broader strategic goals. Clear objectives provide direction and focus, ensuring that all efforts are concentrated on achieving the desired outcomes. By setting measurable targets, organizations can track their progress and make necessary adjustments to stay on course.

Aligning Departmental Goals with Strategic Objectives

For a strategy to be effective, all departments within the organization must align their goals with the overall strategic objectives. This alignment ensures that every team's efforts contribute to the broader organizational goals, minimizing conflicts and maximizing efficiency. Techniques such as cascading objectives, regular communication, and cross-functional collaboration are essential to ensure that departmental goals are in sync with the organization's strategy.

Developing an Effective Implementation Plan

An effective implementation plan serves as a roadmap for executing the strategy. It outlines the specific steps, resources, and timelines required to achieve the strategic objectives. Key components of an implementation plan include task breakdowns, resource allocation, timeline setting, and risk management. A well-structured plan ensures that everyone knows what needs to be done, when, and with what resources, facilitating smooth and efficient execution.

Monitoring Progress Continuously

Continuous monitoring is vital to ensure that the strategy remains on track and that any deviations are quickly addressed. Regularly tracking progress against key performance indicators (KPIs) allows organizations to identify issues early and make necessary adjustments. Tools like dashboards, reports, and real-time data tracking are invaluable for maintaining visibility into the implementation process and ensuring that strategic objectives are met.

Communicating the Strategy Across the Organization

Effective communication is a cornerstone of successful strategy implementation. It ensures that all employees understand the strategy, their role in its execution, and how their efforts contribute to the overall goals. Clear, consistent communication keeps everyone informed and engaged, fostering a shared commitment to the strategy's success. Regular updates, feedback loops, and two-way communication channels are essential for maintaining alignment and transparency.

Using Data for Informed Decision-Making

Data-driven decision-making is critical in strategy implementation. By analyzing performance metrics and other relevant data, organizations can make informed decisions that enhance the effectiveness of their strategy. Regular data analysis helps identify trends, assess progress, and make adjustments as needed, ensuring that the strategy remains relevant and effective.

Ensuring Accountability and Measuring Success

Establishing accountability within the organization is crucial for successful strategy implementation. Clear roles and responsibilities, coupled with regular performance reviews, ensure that everyone is accountable for their part in executing the strategy. Measuring success through KPIs and other metrics provides a clear indication of progress and helps organizations evaluate whether they are on track to achieve their strategic objectives.

Continuous Strategic Plan Refinement

The business environment is constantly changing, and strategies must evolve to remain effective. Continuous strategic plan refinement involves regularly reviewing and adjusting the strategy based on feedback, performance data, and changing conditions. This ongoing process of improvement ensures that the strategy stays relevant and continues to drive the organization toward its long-term goals.

Addressing Challenges in the Implementation Process

Implementing strategy is a complex task often met with various challenges. These obstacles can slow progress and prevent an organization from reaching its strategic goals. However, by recognizing and proactively addressing these challenges, organizations can navigate the implementation process more effectively.

Lack of Clear Objectives and Priorities

Vague or poorly defined objectives can cause confusion and misaligned efforts, hindering progress.

Tips to tackle this challenge:

• Set SMART Objectives: Ensure objectives are Specific, Measurable, Achievable, Relevant, and Time-bound .
• Prioritize Goals: Rank objectives by importance and urgency to focus on critical tasks.
• Communicate Clearly: Make sure all team members understand the goals and their role in achieving them.

Inadequate Resource Allocation

Insufficient resources—time, budget, or personnel—can derail even the best strategies.

• Conduct Resource Assessments: Ensure all tasks have the necessary resources before implementation.
• Allocate Wisely: Focus resources on tasks that have the most impact.
• Monitor Usage: Regularly review resource use and make adjustments as needed.

Poor Communication

Ineffective communication can lead to misunderstandings, misalignment, and reduced coordination.

• Establish Clear Channels: Use structured communication methods like regular meetings and updates.
• Encourage Open Dialogue: Create an environment where feedback and concerns are openly shared.
• Ensure Consistency: Provide consistent messaging across all levels to maintain focus and alignment.

Resistance to Change

Change can be challenging , especially if it disrupts routines or requires new skills.

• Engage Early: Involve employees in planning to build buy-in and reduce resistance.
• Provide Training: Equip employees with the skills needed to adapt to new processes.
• Communicate Benefits: Clearly explain the advantages of changes for the organization and individual roles.

Lack of Accountability

Without clear accountability, tasks may be delayed, poorly executed, or overlooked.

• Define Roles Clearly: Make sure that everyone knows who is responsible for each task.
• Implement Tracking: Use tools to monitor progress and hold individuals accountable.
• Conduct Regular Check-Ins: Schedule progress reviews to assess performance and make adjustments.

Achieve Successful Strategy Implementation With Spider Impact

Implementing a strategy successfully requires clear objectives, aligned efforts, and continuous monitoring—all of which can be complex to manage without the right tools.

Spider Impact simplifies this process by aligning your strategic goals with daily operations, ensuring every department and team is focused on what truly matters. With real-time KPI tracking, automated reporting, and centralized data management, Spider Impact keeps your organization on course and adaptable to ongoing changes.

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The continued importance of succession planning in community banking

• Financial Institutions

Successful banking teams, as well as regulators, recognize proactive succession planning as a key governance tool. The right planning can promote a bank’s resilience, especially during challenging times, and positively impact shareholder value.

What are specific ways that succession planning positively impacts a community bank?

• Risk mitigation: Effective succession planning minimizes disruptions caused by leadership changes. By reducing uncertainty for all stakeholders, succession planning promotes continuity, a key disruptor to achieving an institution’s long-term strategies
• Talent development: Succession planning demonstrates a commitment to employee development, attracting and retaining top talent in key functional areas.
• Business continuity: A well-prepared succession plan helps ensure smooth operations even when key leaders transition. Institutions are facing the need to document institutional knowledge or various procedures that have been the dominion of long-tenured employees.

What are some challenges institutions face in succession planning?

Community banks often face unique challenges, such as:

• Pipeline of qualified candidates: Without a pool of qualified candidates, it can be difficult to identify, recruit and nurture potential leaders. Rural or geographic concerns often create challenges in identifying candidates.
• Providing competitive salaries: Tight margins and budget strains impact the ability to offer competitive compensation to retain talent.
• Cultural fit: Balancing succession with maintaining the bank’s cultural characteristics is becoming more common.
• Widening range of skill sets: The complexity of managing a banking operation has increased the range and depth of skills needed for leadership. This large range of skills can also force an institution to consider outsourcing as an alternative to recruitment.

It starts with a timeline and the need to document. So, what are the steps for effective succession planning?

• Assess and map talent needs: Understand short- and long-term talent requirements for the institution. Each institution is unique, so the talent map will vary based on need.
• Identify potential leaders: Look within the organization and consider external candidates. Often, a third party can provide an unbiased assessment of individuals.
• Develop leadership skills: Using your talent map, understand what training and mentorship needs to be provided.
• Develop a succession pipeline: Determine what steps can be taken to ensure a pool of qualified successors.
• Regularly review and update: Review your documented plan consistently. What needs to be adapted to changing circumstances?
• Involve the board: From both an operational and regulatory perspective, the engagement of the board in succession discussions is critical. (Note: Board succession is a separate matter from internal succession planning.)
• Communicate the plan: Transparency is crucial for buy-in and alignment for all stakeholders.

Community banks must prioritize succession planning to navigate leadership transitions effectively and maintain stability. By doing so, they safeguard their future success and the stakeholders they serve.

How Wipfli can help

If your community bank is dealing with succession planning challenges, our financial professionals are ready to help. We can assist in drafting a road map to a more secure outlook for your organization. Talk to one of our advisors today to get started on a plan for the future.

Fill out the form below, and we’ll be in touch to discuss your financial institution’s needs.

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Navigating Queensland’s Planning Framework: Understanding the Key Concepts: Part 3

In our previous articles , we looked at what ‘other relevant matters’ assessment managers can give weight to when carrying out their assessment of development applications. We also discussed the shift away from the previous ‘two-part’ assessment process under the Sustainable Planning Act 2009 and focused on the broad discretion assessment managers now enjoy under the Planning Act 2016 ( Planning Act ).

This brings us to the next issue we will be considering – the relevance of planning schemes in development assessment under the Planning Act.

Given the broad discretion under which assessment managers operate under the Planning Act, and the reduced primacy of planning schemes, it would be reasonable for one to question the relevance of planning schemes in development assessment.

After all, if an assessment manager can give consideration to such a wide range of relevant matters, what role does a planning scheme play in development assessment?

In simple terms, when it comes to development assessment, the primary functions of a planning scheme are to categorise development (as either accepted or assessable) and set the level of assessment.

When assessing code assessable development, an assessment manager must only assess applications against the relevant planning scheme provisions 1 and must approve applications that comply with all of the relevant provisions. 2 This is a mandate of the Planning Act. In these circumstances the planning scheme serves the purpose of limiting the discretion that can be exercised by an assessment manager.

For impact assessment, assessment managers enjoy a much broader discretion and can give weight to other relevant matters when carrying out development assessment. That is not to say, however, that planning schemes are to be ignored in favour of other matters. Section 45(5)(a) of the Planning Act still requires that assessment be carried out against the relevant assessment benchmarks (i.e. planning scheme provisions). The ultimate decision (and weight to be given to the planning scheme and other relevant matters) is, however, at the discretion of the assessment manager once this mandatory assessment has taken place. 3

Following the enactment of the Planning Act, the relevance of planning schemes was considered in the Court of Appeal matter of Abeleda & Anor v Brisbane City Council & Anor [2020] QCA 257 ( Abeleda ). In this matter, Justice Mullins noted that:

[t]he change to the assessment and decision-making framework under the [Planning] Act by eliminating the two-stage test has not altered the fundamental nature of a planning scheme. 4

In forming this view, Justice Mullins referred to the comments of Justice McMurdo in the decision of Bell v Brisbane City Council [2018] QCA 84 ( Bell ), in which it was noted that:

… a planning scheme must be accepted as a comprehensive expression of what will constitute, in the public interest, the appropriate development of land … It is not for the decision maker (including in this context the Court), to gainsay the expression of what constitutes the public interest that is in a planning scheme. 5

With further reference to the Bell decision, Justice Mullins (in Abeleda ) provided that:

[t]he absolute terms in which McMurdo JA expressed in [67] and [70] of Bell that it is in the public interest that the planning scheme is applied, unless the contrary is demonstrated, are no longer applicable to the exercise of the discretion by the decision-maker under s60(3) of the [Planning] Act, as the outcome of the development application is not necessarily determined by the degree of compliance against the assessment benchmarks and the decision maker is permitted to have regard to other relevant matters, in addition to the mandatory assessment against the assessment benchmarks in the planning scheme. I would anticipate in most instances, where a planning scheme is not affected by changed circumstances of the type referred to in Bell at [68], that the decision-maker would give significant weight to the public interest expressed in the planning scheme in undertaking the decision-making under s60(3) of the [Planning] Act. 6

Relevantly, it was also noted that:

[t]he starting point must generally be that compliance with the planning scheme is accorded the weight that is appropriate in the particular circumstances by virtue of it being the reflection of the public interest (and the extent of any non-compliance is also weighted accordingly to the circumstances), in order to be considered and balanced by the decision-maker with any other relevant factors. 7

The relevance of a planning scheme in light of changed circumstances was also considered in the matter of Peach v Brisbane City Council & Anor [2019] QPEC 41 ( Peach ). In this appeal, his Honour Judge Williamson KC concluded that even in the face of significant non-compliances with a planning scheme, an approval can still be granted, in the right set of circumstances.

The Peach matter was a submitter appeal against Brisbane City Council's approval of a high-rise office tower in Spring Hill. Version 8 of the planning scheme was in force at the time the application was made, however, Council gave determinative weight to draft scheme amendments which favoured approval of the development. These amendments included a new neighbourhood plan which encouraged a material increase in the height, bulk, scale and form of future development in Spring Hill. Version 13 of the planning scheme was in effect at the date of the hearing and included the planning scheme amendments. Judge Williamson KC considered Ashvan Investments Unit Trust v Brisbane City Council & Ors [2019] QPEC 16 ( Ashvan ) and Smout v Brisbane City Council [2019] QPEC 10 ( Smout ) in setting out the relevant statutory assessment and decision making framework. His Honour reiterated that:

[t]he planning discretion to be exercised does not mandate that the application must be refused because a non-compliance with an assessment benchmark, namely a planning scheme, has been identified. Given the size and complexity of modern performance based schemes, not every non-compliance, in my view, will warrant refusal. 8

It was found that the nature of the non-compliances with version 8 were significant and (taken in isolation) represented “a sound, if not compelling, reason to refuse the application.” 9

In its submissions, the applicant relied upon the principle that the Court may depart from the intent expressed in a planning scheme where the local government has itself departed from that intent, or where it has been overtaken by events. His Honour acknowledged that these cases are rare, however, this was one of those cases and to refuse the application by reference to version 8 of the planning scheme would serve no planning purpose.

His Honour found that the planning discretion in this case was not limited to a decision based solely on the planning documents in force at the time the application was made. His Honour was of the view that the assessment manager (and the Court on appeal) may have regard to amended or new planning documents as this enables the planning discretion to be exercised in a way that aligns with the most contemporary statement of planning intent.

The submitter appellant submitted that even though the assessment manager has discretion to consider ‘relevant matters’, they should be given less weight than the prescribed planning controls. This submission was rejected by his Honour. It was found that there was no reason to depart from the plain and ordinary meaning of s45 and s60 of the Planning Act. Ultimately, the Planning Act did not call for less weight to be applied to relevant matters compared to applicable provisions of the planning scheme. His Honour noted that:

[n]either provision purports to predetermine, or limit, the weight a relevant matter/s may be given in the assessment of a development application or in the exercise of the planning discretion. The weight to be given to a prescribed matter, or a relevant matter, is for the assessment manager (or this Court on appeal) to determine on an application by application basis. The exercise is to be guided by, inter alia, s.5(1) of the PA, and town planning practice and principle. 10

In the end, his Honour dismissed the appeal and ruled that the planning strategy in force at the time the application was made had been overtaken by events and it no longer had relevance, in a planning sense, to the subject site.

However, it is important to note that Peach does not totally disregard the relevance of the planning scheme. Just as was discussed in Ashvan , the planning scheme is still relevant and must be considered in conjunction with the other relevant matters. Section 45(5)(a) of the Planning Act makes it clear that an application must still be assessed against the relevant assessment benchmarks. The existence of a non-compliance will be a relevant fact and circumstance in the exercise of the assessment manager's discretion, but not necessarily a determinative factor. When faced with a development application, the assessment manager must determine how non-compliance with a planning scheme informs the discretion conferred by the Planning Act. 11

As noted previously, the goal of the assessment process is to reach a balanced decision in the public interest. Unfortunately, while it is clear that planning schemes are still relevant and must be considered when reaching a balanced decision in the public interest, “the manner in which the balance between rigidity and flexibility is struck in any given case does not lend itself to a general statement of principle or precise formulation”. 12 Ultimately, the cases have concluded that the planning discretion “is invariably complicated and … it will turn on the facts and circumstances of each case.” 13

Key takeaways

• Planning schemes are an expression of the public interest.
• When it comes to development assessment, planning schemes categorise development and set the levels of assessment.
• The Planning Act does not predetermine / limit the weight that can be given to other relevant matters when carrying our development assessment – the weight is to be determined by the assessment manager on an application by application basis.
• Assessment managers must assess applications against the relevant planning scheme provisions and then make a decision based on how a proposed development would / would not be in the public interest in light of compliance / non-compliance with the planning scheme and any other relevant matters.
• Planning Act 2016 , s45(3)(a).
• Planning Act 2016 , s60(2)(a).
• Planning Act 2016 , s60(3).
• A beleda & Anor v Brisbane City Council & Anor [2020] QCA 257, at [37].
• Abeleda & Anor v Brisbane City Council & Anor [2020] QCA 257, at [38].
• Abeleda & Anor v Brisbane City Council & Anor [2020] QCA 257, at [40].
• Abeleda & Anor v Brisbane City Council & Anor [2020] QCA 257, at [42].
• Peach v Brisbane City Council & Anor [2019] QPEC 41, at [39].
• Peach v Brisbane City Council & Anor [2019] QPEC 41, at [84].
• Peach v Brisbane City Council & Anor [2019] QPEC 41, at [47].
• Ashvan Investments Unit Trust v Brisbane City Council & Ors [2019] QPEC 16, at [53].
• Ashvan Investments Unit Trust v Brisbane City Council & Ors [2019] QPEC 16, at [60].

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