Definition of Business Planning

Business planning is the process of researching, choosing, and justifying a course of action for a business. This process generally includes the writing of a formal business plan, geared around the requirements of its intended readers. If the business plan is for a new or existing business seeking capital investment, it must have a focus on external funders. If the business plan is a strategic document for internal purposes, it may be less formal. In either case, a business plan should include enough detail to make its implementation possible.

Setting a Plan of Attack

A business plan is, in one sense, a plan of attack for the management of the business to follow. This plan of attack guides the management going forward, informs outside partners (such as funders) of what the company will do, and serves as a means to evaluate the progress and success of the company along the way. Business planning may begin with a great deal of research and analysis, but must end with an actionable plan which managers can use as their marching orders.

Proving Return on Investment

Whether the business plan is for readers who are internal or external to the business, there is a need to prove the case for a reasonable return on investment for the resources used by the company. This can be funding in the form of cash from lenders or investors, the time committed (“sweat equity”) by founders, or the cash proceeds and other assets of the business itself. The business plan must explain the background of the business opportunity that exists and provide support for this opportunity. It must then explain the methods the company will use to take advantage of this opportunity and show the means which the company has in the form of brand, equipment, intellectual property, management, and staff to move forward with the plan. Finally, the plan must show the financial results expected and, in the case of an external plan, how the financial returns will flow back to the funders.

Non-Profits Business Plan, Too

A non-profit must use the same kind of process for business planning. However, the financial results are not the primary return in a non-profit organization. The results are generally in the form of the creation of some type of public good for individuals or businesses. Nonetheless, there should be an attempt to quantify the expectations of these results.