Business planning, also known as strategic planning or long-range planning, is a management-directed process that is intended to determine a desired future state for a business entity and to define overall strategies for accomplishing the desired state.
Through planning, management decides what objectives to pursue during a future period, and what actions to undertake to achieve those objectives.
Successful business planning requires concentrated time and effort in a systematic approach that involves: assessing the present situation; anticipating future profitability and market conditions; determining objectives and goals; outlining a course of action; and analyzing the financial implications of these actions.
From an array of alternatives, management distills a broad set of interrelated choices to form its long-term strategy. This strategy is implemented through the annual budgeting process, in which detailed, short-term plans are formulated to guide day-to-day activities in order to attain the company’s long-term objectives and goals.
A well-written Business Plan lays out the best growth path and strategy, as well as the rationale for the selection of the strategy over other alternatives. In essence, a Business Plan is the articulation and explanation of why the chosen game plan for building the company makes sense, what resources it will need to implement the vision, who the team will be that will have the skills and leadership to execute the vision, and what path they will follow to get there
Business planning is more than simply fore-casting future events and activities. Planning is a rigorous, formal, intellectual, and standardized process. Planning is a dynamic, complex decision-making process where management evaluates its ability to manipulate controllable factors and to respond to uncontrollable factors in an environment of uncertainty.
The better the analysis, the better the chances that most of the goals set forth in the Business Plan will be achieved. A well-written Business Plan doesn’t oversell the good, undersell the bad or ignore the ugly! It is essentially an articulation of the entrepreneurial company’s plan for managing the risks and challenges involved in building or expanding the business. As such, it should acknowledge that growth and success are moving targets by anticipating as many future events or circumstances that will affect the company’s objectives.