Business Planning Theory
Creating a plan for your business is an essential first step, as well as an ongoing activity that you will engage in throughout the life of your business. Business planning is how you will know where you are now, where you are going and how you will get there. A plan must be specific enough to inform your decisions in the day-to-day running of your business, but it should be considered a guideline rather than an ironclad rule book.
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Function
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Business planning can be done informally to assist with an internal understanding of your business, or it can be formally presented to investors or banks when obtaining financing. In both cases, the purpose is to convey a high-level understanding of how you will be conducting business and how those activities result in the business of making money.
Types
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A business plan has traditionally been a text document supported by graphs and presented to investors. Most online business planning templates follow this format. However, there are other ways to present the information or to focus on specific aspects of the business. A mind map has become one of the most popular internal planning tools. Creative companies might create an interactive planning tool, such as a website or wiki.
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Features
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The essential information addressed in business planning conveys strategy, operational methods, details of products or services you offer, marketing and customer research data, business environment, such as competitors and regulations that affect your business, plans for growth and financial history and projections.
Benefits
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Business planning should be an ongoing part of running your business. Writing an initial plan will help you understand how the entire business will work and often answers questions you had not known to ask. Once written, the plan becomes a living document that you can use to check your progress against and adjust as market conditions change. Consider it an evaluation tool for periodically assessing the health of the business, as well as a reference document to help you make decisions about new opportunities.
Size
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While business plans might range from one to hundreds or even thousands of pages, most small businesses can plan on five to 20 pages of text with an equal number of appendixes and supporting pages. The more concise you can be, the better.
Considerations
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Planning your business does not make money. You may be tempted to put it off in favor of making immediate income, but this would be a critical mistake. Most businesses that fail do so through lack of adequate planning and lack of adequate advisers. Business planning is an investment that will not pay visible, tangible rewards but can easily make the difference between ultimate success and failure.
Expert Insight
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This process will usually take more time than you think it should. Budget at least one week of planning for every $100,000 of revenue you expect to make in your first three years.
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