Importance of Planning in Business Management

Planning is one of the most important tasks in business or any type of management as well. It is really does not a matter of the size of the business. Does not matter if it is a profitable or non-profitable business organization you are going to start, a planning is a must. Why? The reason is that the planning is the first element of the four core elements of management. It is very easy to start a business, but without proper planning it will fall apart soon after the inception. So, planing is one of the most important works an entrepreneur must do.

Importance of Planning in Business Management

I have listed top reasons why planning is important in business organization. Below the important points are discussed.

Planning for Uncertainty

Uncertainty is a common phenomenon for every type of profitable or non-profit business organization. When you do not have any knowledge of any future event, then it is called to be an uncertainty. Here a business plan comes with a solution. A business plan is a future course of actions. That means you enlist a set of work you will be doing after launching the business. You know your steps. Now you know what you will be doing throughout the business life cycle. By pointing out your future actions, you are avoiding many uncertainties. For example, maybe you do not know how you will find an effective employee for your organization. But in the plan, you mentioned that the recruitment process will be handled by a third party. It will surely reduce the uncertainty in the future.

Reducing the Business Risk

Risk is the chance of happening a thing that may bring profit or loss for your business. Risk deals with chances. That means it’s about the probability. You cannot be completely sure of an event. For example, a flood may occur in the beginning of the year which may result in decrease in sales. Business risk will always be there. Here plan plays an important role. A business plan includes a list of events that may or may not take place in the future and a set of solutions. So, if those problematic events take place, the business owner goes for a solution. So, you know the solution for a set of problems. In this way, an effective business plan is very much important for your business.

Planning for a better Growth

A business does not stand alone is the same place year after year. It needs to grow. Why? Because, if a business does not expand, you cannot increase profit after a certain amount. So, you need your business grown. A business plan tells you when you will want to inject more money in your business, that’s investment plan. You want to take loan for your business? When do you want to do that? After reaching few certain goals? Do you want to take more investors? Or you just want to borrow from your relatives? A business plan creates a timeline for the future investment which ensures a future growth and results in increased profit margin.

Taking a Specific Action for your Business

We have already talked about that a plan is a set of future actions that you are going to execute. There are specific actions you will be taking for your business. A business plan enlists future business opportunities that might be utilized in the future. For that, a business might need to develop the strengths needed to utilize those opportunities in the future. By taking proper actions in the business, a company develops its strengths. For example, a specific action might be recruitment of a set of sale’s executive who will be working under the condition of sales commission when there is a chance of high sales growth. A business plan identifies specific action for your business.

Proper Management of Cash Flow

Managing cash flow is a vital task in a business organization. If you do not know how to utilize the cash flow, you might end up with losses. As a result, your business will fail. A business plan creates a financial plan. It tells you how you will pay the payment to your suppliers or how much credit will be there. It will also help you to maintain a good relationship with your suppliers if you go with your plan. Though it is very critical task, but still you must manage you cash flow according to your business plan.

Planning includes the SWOT Analysis

A business plan also includes a SWOT Analysis. The SWOT is an acronym. The elaboration of SWOT is the strengths & weaknesses of and the opportunities & threats for a business organization. So, it will help you to identify the strengths and weaknesses, not only for your business but also for your competitors’. It will also help to identify the opportunities & threats for your business. It will help you to compare your business with the business of your competitors. As a result, you will be able to be more competitive in your industry.

Valuation of the Business

A business plan tells about the value of the business. When you have the complete business plan, you know what can be the value of that business in future. Measuring the value is critical when it deals with the fair value. But an effective business plan certainly can tell you what might be the business worth of.

Efficient and Effective Use of the Resources

Resources are not unlimited. As every business has a limitation for the resources, those businesses want to utilize those resources efficiently. Low cost production can be achieved only if the resources are utilized properly. A business plan has a set of actions. So, you know how much resource you will need in the future. As a result, resource allocation can be done beforehand. For example, you may need to take a business loan. But why should you take the loan today if you start your production in the next week?

Enlisting the Short Term and Long Term Goals

Setting goal is one of the most important tasks in small or large sized business organization. Every business organization needs to set its short term and long term goals in the inception. A business includes a set of business goals. These goals maybe divided into short terms and long term goals. Short term goals are those goals that can be achieved within a very short period of time, perhaps a week or a month. Reaching the monthly target sale can be an example of a short term goal. On the other hand, capturing a large market share can be an example of a long term goal. For the both cases, the goals should be specific, reachable, and countable. A business plan specifies those goals. By setting up the goal, a business planner makes a way to the success of the business organization because everyone knows for what they are working in the organization. This is why an effective business plan includes a set of business goals.

Creation of Distinctive Advantages

A business plan helps you to identify the strengths and weaknesses of your business. This is exactly what you need to develop competitive advantages for your business. You may have one advantage that your competitors do not possess. For example, you have the ability to recognize an efficient employee in the interview board. But your competitors can not select the correct people for their organization. So, you can build an efficient workforce which may lead to a distinctive advantage.

Determine the Future Recruitment

As a business plan has an expansion plan in it, it has the recruitment plan as well. If you know the time when you are going to inject more fund into your business, you also know how many people you will have to recruit to look after the new operations.

A Gateway to the Feasibility Study

A business plan is the complete set of actions that you will execute. You perhaps soon will start your business. But how do you know that the business will bring profit for you? Do you have any confirmation for it? Here the feasibility study comes to play the next role. The feasibility study assesses the practicality of the business plan. It will examine the business plan, and tells you if the business will be able to make the profit or not.

Additional Reading on the Significance of Business Planning

What are the Essential Elements of a Business Plan?

According to the QuickBook, a business plan must have 7 elements. Those are the executive summary, business description, market analysis, organization management, sales strategies, funding requirements, and financial projections.

What are some Uses of Business Plan?

The most important uses of an effective business plan are sticking to the plan, understanding the pressure points, dealing with the possibility of failure, managing more investment, taking loans from venture capitalists, selling the plan, and many more.

What is the Importance of Planning in Management?

Planning is the first priority in a business. In management, the planning give you the opportunities to set the future course of actions.

Why Planning is Important in Life?

Without making and following a plan, a person may fall apart. Passing a life without a proper plan is like meaningless. Planning helps us to select future course of actions, organizing our lives, setting up the proper directions, and achieve desired goals. Without planning, our lives are like buildings with weak pillars.

What is the Importance of Planning in Education?

Planning for education is one of the most important tasks in our lives. The most important reasons are financial supports, selection of institutions, achieving a desired goal, reaching a target career, and finally, uses of knowledge for a better world.

What is the most popular Quote by Peter Drucker on Planning?

One of the strongest quotes I encountered in my life is by Peter F. Drucker, – “Unless commitment is made, there are only promises and hopes; but no plans.”

In Conclusion

We have elaborated most important points on the importance of business planning. Without a business plan, a business person is totally blind. If the person does not have a plan, s/he does not know what to do next. In every step he takes, he needs time to make a decision. But if there is a business plan, there is certainty.

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References

• https://en.wikipedia.org/wiki/Feasibility_study
• https://www.sba.gov/starting-business/write-your-business-plan
• https://en.wikipedia.org/wiki/Business_plan
• https://www.financialplanning.org.uk/wayfinder/what-financial-planning