Breaking the Myths around Business Planning - Article I
Updated: Nov 20, 2020
'NUMBERS! You handle the numbers, I'll do the business'
This is quite a common quote that we hear. Whenever we discuss the prospect of undertaking a business planning exercise with our clients, they feel that we might interrogate them and talk about crunching numbers, absolute profit and loss et al. That’s when we realize that it's time to take a step back and tell them what exactly is business planning.
What is Business Planning?
It is a document which highlights your vision, mission, business objectives, and the resources and tools required to achieve the objectives.
We have sat down with a few entrepreneurs to understand their thoughts and record their immediate expressions when they hear the word 'business planning'. Our discussions with them led us to curate this article that aims to debunk some of the common myths around the concept of business planning.
Myth #1 – It entails a lot of number crunching
Numbers are just enablers here, the major part of business planning is identifying macro things and then going down at the micro level where numbers are to be calculated. Let us simplify this statement. As a business owner, all you have to do is answer a few questions critical to your business that somewhere you already have answers. Examples of such questions are:
What is your target geographical market?
Who is your target consumer including their characteristics such as age-group, sex, cultures etc.?
How is your competition placed and how do you differentiate against them (in the form of SWOT analysis)?
How do you intend to reach your target consumers?
Once you have the answers to such questions, provide the information to a consultant. The consultant can independently undertake research and identify relevant data that can help plan the path ahead for your business. Therefore, the critical aspect of business planning is obtaining the answers to the core business questions.
Myth #2 – Business planning is only for startups
This couldn’t be farther from the truth. The business plan can be prepared from a long term or a short term horizon. An entrepreneur needs to identify and budget the resources that are going to be required for the future. Be it a startup or a legacy business, planning and organizing future requirements is essential for sustained growth and to mitigate any envisioned risks.
As a best practice, every business owner should undertake business planning exercise at least once a year and quarterly access the progress against the plan.
Myth #3 – I don’t need a business plan, I know it all in my mind
Do you go on an international trip without doing any research on the destination? You identify locations you want to visit, the approximate cost, the currency rate and accordingly budget and carry foreign currency along with a buffer. Businesses are equivalent to taking a prolonged trip. It is better to have a plan - to be prepared for the uncertainties that you may face along your journey or just to get you back on track if you have deviated from your vision of the business - a good business plan will ensure this.
Additionally, as an entrepreneur your mind is always on an overdrive mode, analyzing multiple intangible things. You don’t want to burden your mind by placing a business plan in there when you can very well put in print which can be organized and managed. Thus it is better to pen it down and make it accessible to your team as well to ensure everyone is aligned with the vision.
Myth #4 – My business plan has to be precise
If you spend too much time working and detailing a business plan, you will have less time to work on the execution of the plan or even on your business. Business planning is an ongoing exercise - you start at a macro level and gradually fine tune your plans to suit your needs as more information and nuances are made available to you.
As a best practice, it is advisable to have a formal business planning and budgeting meeting before the start of every financial year and get your team involved in the process to ensure ownership of the actions and quantum. Also, it is recommended to review the actual vs budgeted activities and numbers on a quarterly basis.
We hope you found this a good read and gained some insights. If you are still unsure of certain aspects, drop us an email. We are here to help you out with your business and across the journey.