Integrative Business Planning – Managing Complexity

Introduction

Business Planning is normally done when a business plan is needed for financing purposes or to use as a guideline on running and growing a business (as a start-up or for the next time frame). Many crucial features of a business need to be addressed and balanced in this planning process. Various options, problems and risks relating to these features will be considered.

Entrepreneurs often assume that one variable has a linear relationship with another (e.g. $x spending on marketing will create $y income in sales). Business is, however, seldom that simple. Many multi-directional relationships tend to occur between the various features. Sales would for instance also be influenced by product quality, price, etc. Sales on the other hand will influence future expansions. To cater for this phenomenon an integrative business planning process is required.

Crucial Issues in Business Planning

Every business is different and the crucial issues in one does not necessary occur in another. What is, however, important is that the business planners ensure that they analyse and plan for all the relevant features for their specific business. This would normally include the issues that is highlighted below.

  • The Business – It is essential to ensure that the opportunity, the business concept, its products, services and strategies and the industry that it operates in are sound.
  • Marketing – Marketing strategy needs to be considered. This include aspects such as pricing and promotion.
  • Market Research – This is a crucial issue that is often neglected. It is important to know and understand the customers, the market size and trends and who the competition is.
  • Development – All issues regarding the development of new products, services, markets and facilities need to be planned for.
  • Operations – All aspects regarding the what, where and how of operations must be considered.
  • The Team – The management team need to match the requirements of a business. It would be preferable to establish what skills/jobs are needed and then to link the people to it. Where there are a lack of skills, training programmes can be implemented and new people can be hired. The whole organigram and composition of board of directors, management teams, etc. need to be planned for.
  • Finances – Finances are the ultimate yardstick of the success of a business, but it can not stand on its own. Important financial issues would typically include investment-, financing- and dividend decisions and policies. It is also crucial to plan for turnover (sales), gross profit margins and cost control (of expenses). The relationships between these issues (financial ratios) need further planning to establish if the business will be profitable, liquid and solvent. Return on investment (ROI) and sustainable business growth would for instance be specific aspects to consider.
  • Risk Management – The various risks that occur need to be determined, analysed and catered for. Fatal flaws need to be eliminated. Operational- and financial risks can often be hedged. This would incur certain costs and strategies such as manufacturing in various countries and buying and selling futures and options in different currencies.

The Complexity of Detailed Business Planning

A quick review of the brief summary of the crucial issues that need to be considered gives a glimpse of the complexity involved in business planning. If we just look at the financial issues we will see that the price will have an impact on the sales (turnover). The lower the price the more the physical volumes will normally be (except if image requires a high price). Turnover and total profits will, however, not necessary be higher. There is normally a fine balance that exist between the price, volume sales, turnover and profits.

To complicate this even further the turnover, costs and profits and there timings have a direct impact on the cashflow of the company (a very critical issue). This whole aspect is then further complicated by the investment- (capital expenditure), financing- (equity or debt?) and dividend decisions. By spending too much on a plant, having too much debt and paying out too much to shareholders will have a negative effect on the sustainable business growth of the company and this will reduce the targets that are achievable. This scenario shows only a portion of the various aspects that need to balance within the broader financial sphere.

Unfortunately the complication of the example does not stop with the finances. The finances influence many other crucial aspects of the business. On the other hand many of the other crucial aspects also have an effect on the finances as well as on each other.

The financial decisions would for instance have a direct bearing on the growth of the business (e.g. geographical expansions and new product development), marketing spending and people employment and development. All these issues would similar have an impact on the financial issues and on each other.

An Integrative Business Planning Approach

The general tendency in business planning would be to tackle each issue independently and then to just add the pieces together and re-plan if something is not making sense. Business planning often starts with some projected turnover and profit figures in mind. Everything is then worked backwards from there.

A much better option would be to have an integrative business planning approach. In order to do this the following steps are needed:

  1. Determine all the salient features of the business.
  2. Determine the relationships between these salient features.
  3. Try and solve every feature by keeping the casualties and effects with other features in mind.
  4. Use “what-if” questions to create better holistic solutions.

Summary

The idea in business planning is not to optimise the one aspect of the business and neglect or ignore some of the others. The various relationships (causes and effects) need to be catered for in an integrative way. One crucial salient feature or relationship that is ignored can put the existence of the whole business in jeopardy.

Copyright© 2008 by Wim Venter. ALL RIGHTS RESERVED.

How to Write a Business Plan in a Good Way

Having a business plan will help you to do the right thing in your business since the plan will lead you to the right path so you can run your business better. The plan of business will help you in getting the best financing so you can make your industry grow well so you can take the benefits from it. If you would like to make the right plan for your business, please follow the instructions below.

1. First of all, you need to collect more information about your business plan. The information that is included here is your company, your service or product, competition, customers and also the risk you may get. Here, this information will be used as an important consideration for you so you can do something right for your business.

2. You can write the summary about your plan. You do not need to make it longer because it will explain letter. You just need to make it in 2 pages.

3. In explaining your company, it is important for you to describe the purpose of your industry. In this case, you need to talk of the management team you have. Also, you can provide more information about their skills so you will be sure that you have qualified team.

4. Then, you are advised to explain about your service or product. In this case, it is essential for you to explain well because the information will help you to know well about your product or service so you can do something right to make more clients or costumers attracted to yours.

5. When talking about your market, you need to describe about general trends in your industry. In this case, you need to give detailed information about the market segment that you will pursue. Also, you must explain about the niche and the customers you are targeting. For further information, you are advice to analyze the competition you are facing so you can know well about your business.

6. Also, it is important for you to explain about your marketing plan. In giving this kind of information, you need to provide better explanation about your advertising, public relations and also your promotion. In doing the process of marketing, you also need to estimate about the cost you need to spend.

7. For the last step, it is important for you to give detail information about your expenses and revenue projection annually. In this case, the information provided will give the best consideration for you so you can take the right decision for your business.

Business Start-Up: Pointers for Writing Business Plan

Business Start-Up: Plan your business successfully.

Are you planning to start your own business? What does it takes to have a successful business? Lots of money, experienced business partners or just plain guts!! You’ll be surprised; you just need a good business plan. But what constitute a good business plan? There isn’t any specific rule on good business plan, but here are some precautions that you may consider to avoid failures.

1. Set Company Values through Vision statements. First, you had to have vision for your company. The vision will help you to set-up some values that you want your staff to abide as the company. These values will differentiate you from your competitors. Looking forward, it enhances the growth that will make you proud, someday. Develop a mission statement that will help achieve immediate or minor goals/priorities.

2. Financial forecast and budgeting. Create your own financial forecast and budgeting. It is part of your business plan. Without them you’re planning for failure. But your plan should also covers competitor analysis, market conditions including knowing your industry & customers well. Only with those factors can you plan your budget and forecast well.

3. Serve your customers well. If you don’t serve your customers, others will. Sometimes, customers can be nasty. But if you explained and tried to get them understood, these difficult customers may become your loyal customers. They can also be your centre of influence once they become your friends and liked your service.

4. Always be aware and understand your competitor. You have to be updated of what’s going on in your industry. You can be a big player in your industry, but never be complacent. A newbie in the industry has all the ability to capture your market share without you realizing it.

5. Do take risk. Business is about opportunity and taking risk. However, you have to do some research and analysis to take calculated risk. Make a study on the possible challenges and its potential returns. Don’t just jump into the wagon recklessly. In this way, you minimize your losses.

6. Learn from the expert. You may like to get some feedbacks from an experienced business-owners pertaining to your plan that you wanted to carried out. Even the most experienced entrepreneur does that. The different views may help you to build up on your original ideas better.

7. Prepare for the unexpected. You may have drafted a wonderful business plan. Sometimes your plans still need some twinning due to unexpected events. This may result in amending your budget or forecast, or even abandoned the original plan at all. Therefore, your business plan has to be flexible in accommodating those circumstances.

8. Unique selling points. Your original plan may change with time and circumstances but your customers must be able to experience the difference when dealing with you. Develop a unique selling point to make your company stands out and beyond your competitors. Be it after sales service, follow-up system or whatever. Leave that last good impression with your customers.

9. Rewards and praise your staff. In order to keep your business running, you need a trustworthy, hard-working and dedicated staffs. Without them, your business may suffer. Therefore, you need to incorporate some form of reward system in your planning. This is to motivate your staff better and together, the company will reach greater heights.

10. Review your plan. No plan is wonderful unless you follow through. Identify your milestone. Whenever your sales volume or revenue reached several amount, you need to re-look into your business plan to see the possibility of expansions. Reviewing your business plan occasionally helps you to determine whether your existing process is effective or needs further improvement. Remember, it is your business plan that will turn your vision into reality.