10 Benefits of Business Planning for All Businesses

(Note: I posted this Wednesday on the Small Business Administration’s Industry Word blog, where I am a guest expert. I’m reposting it here because it seems appropriate. View the original.)

SBA-10-benefits-smallerIt’s a shame that so many people think business plans are just for startups, or to back up loan applications, or for getting investors. The truth is that business planning offers serious benefits for everybody in business.

And I’d like to point out that none of these benefits require a big formal business plan document. A lean business plan (as in What Business Plan Type is Best for Me) is usually enough. It takes an hour or two to do the first plan, then just an hour or two to review and revise monthly.

Here are those top ten benefits.

  1. See the whole business. Business planning done right connects the dots in your business so you get a better picture of the whole. Strategy is supposed to relate to tactics with strategic alignment. Does that show up in your plan? Do your sales connect to your sales and marketing expenses? Are your products right for your target market? Are you covering costs including long-term fixed costs, product development, and working capital needs as well? Take a step back and look at the larger picture.
  2. Strategic Focus. Startups and small business need to focus on their special identities, their target markets, and their products or services tailored to match.
  3. Set priorities. You can’t do everything. Business planning helps you keep track of the right things, and the most important things. Allocate your time, effort, and resources strategically.
  4. Manage change. With good planning process you regularly review assumptions, track progress, and catch new developments so you can adjust. Plan vs. actual analysis is a dashboard, and adjusting the plan is steering.
  5. Develop accountability. Good planning process sets expectations and tracks results. It’s a tool for regular review of what’s expected and what happened. Good work shows up. Disappointments show up too. A well-run monthly plan review with plan vs. actual included becomes an impromptu review of tasks and accomplishments.
  6. Manage cash. Good business planning connects the dots in cash flow. Sometimes just watching profits is enough. But when sales on account, physical products, purchasing assets, or repaying debts are involved, cash flow takes planning and management. Profitable businesses suffer when slow-paying clients or too much inventory constipate cash flow. A plan helps you see the problem and adjust to it.
  7. Strategic alignment. Does your day-to-day work fit with your main business tactics? Do those tactics match your strategy? If so, you have strategic alignment. If not, the business planning will bring up the hidden mismatches. For example, if you run a gourmet restaurant that has a drive-through window, you’re out of alignment.
  8. Milestones. Good business planning sets milestones you can work towards. These are key goals you want to achieve, like reaching a defined sales level, hiring that sales manager, or opening the new location. We’re human. We work better when we have visible goals we can work towards.
  9. Metrics. Put your performance indicators and numbers to track into a business plan where you can see them monthly in the plan review meeting. Figure out the numbers that matter. Sales and expenses usually do, but there are also calls, trips, seminars, web traffic, conversion rates, returns, and so forth. Use your business planning to define and track the key metrics.
  10. Realistic regular reminders to keep on track. We all want to do everything for our customers, but sometimes we need to push back to maintain quality and strategic focus. It’s hard, during the heat of the everyday routine, to remember the priorities and focus. The business planning process becomes a regular reminder.

Comments

  • Umer Daraz says:

    A plan helps you forecast your income and expenses, preventing financial surprises and ensuring you have the resources to keep your business going. No more living paycheck to paycheck or scrambling to cover unexpected costs.

  • Ammarajoseph says:

    These tips are great for beginners .

  • Ammarajoseph says:

    This article is a must-read for anyone looking to start their own business. It covers the basics of what it takes to get started with your future in mind!

  • Matt says:

    Great article and very well written! Keep up the good work!

  • Colitco says:

    Either starting a business or just collaborating for a gig, It is very important to have a likewise mindset partner.
    And especially we are into supply and manufacturing which you explained very well.

    This is an insightful read for young entrepreneurs.
    We understand the value of content.

  • Mark Stevens says:

    I have personally never been able to plan or organize things without penning them down on a piece of paper. It helps me visualize things in a better way. Also, seeing things written down in front of me helps connect the dots. A great article and absolutely in line with my perspective. Cheers!

  • Sam says:

    Wow, I had never considered the fact that business planning can help you keep track of the most important things and prioritize them. My entire life I have strived to be an organized person, and I think it is a good skill to have when it comes to a professional career. Do you know how often one should revise a plan in order to make corrections according to new circumstances and opportunities?

    • Tim Berry says:

      @Sam, generally once a month, but it depends on the nature and specifics of the business. Some can last 2-3 months without review … and you don’t necessarily correct every time you review the plan. Thanks for asking.

  • Mary says:

    Thanks!

  • James Akol Mathiang says:

    Thank you very much for helping the world to understand the genesis of how to plan business and make it reality in life. Business is made by minded person with great and love.

  • cedric says:

    Hi Tim
    I appreciate you for writing this article,it has really helped me understand the importance of planning and how vital it is to a business and now to me planning is like the foundation of each and every business,keep up with the good work.

  • Abigail Lee says:

    Very useful article and very well written. A business plan is important for every person who is planning to start a business because of the mentioned benefits in the article. Thanks for sharing it.

  • Business Analyst says:

    I was looking for the full list of books you recommend in each of these categories, but the link at the end of the article doesn’t seem to be working. I’m particularly interested in good “Applied Statistics” and “Statistical Analysis” books, if that helps. Could you point me to the list with your recommendations?

    • Tim Berry says:

      Sorry, all four links at the bottom of the article work for me, so I can’t help you with links. The closest thing I have to a list of book recommendations is the blog category books here on this blog, which is a list of blog posts about books, most of which are books I recommend. But I have no recommendations for books related to applied statistics or statistical analysis, that’s not my expertise.

  • Dave Anderson says:

    That is really interesting that business planning can help you catch new developments and adjust. Something I have been thinking about lately is starting an online business. It has been something that seems to do well for others, and I want to find the opportunities.

  • Todd Stauffer says:

    I like how you said that business planning helps you keep track of the important stuff. That seems like a really important thing to do because it would allow you to progress more. Focusing on the necessary and essential would really mean that you could do more and accomplish more it seems to me.

  • Antonio Caldas says:

    Very good summary.
    I think one great benefit of developing/using Business Plans is that it will give you the chance of training your mindset and exercise the forrest-tree approach. One of the key elements of the BP is to drill down from the overall defined strategy, down to the critical success factors and define metrics to achieve them.
    As you gain experience, this way of thinking will become more and more embedded and I honestly believe it will help you be a more analytical person i.e. be able to better build BP’s.
    That is obviously my opinion, some people might argue.

    Thanks again
    Antonio

    • Tim Berry says:

      Thank you Antonio for the welcome addition. I agree with you, another great benefit is the drilling down with the forest-tree thinking. Thanks for adding that. Tim

  • Karen Espley says:

    Hi Tim
    I couldn’t agree more. I could weep at the networking meetings I go to when I ask how many businesses have business plans and only my hand goes up (and those of my clients :-))
    It’s how to persuade them that this really is an important thing to do when they think they are poddling along quite happily now. I’ve tried waving my plan at them and telling them it just got me a £1k grant and if they want a grant too, come to me and I’ll help them! The lot of a decent business coach/consultant can be a frustrating one 🙂

Leave a Reply to Todd Stauffer Cancel reply

Your email address will not be published. Required fields are marked *