1. Chapter 6: The importance of business planning

2. What is planning?
We always hear the term planning, but exactly is planning? A plan is an outline of an
approach to be taken and Planning is the process of redesigning a series of actions or
procedures with the purpose of using them to achieve a set of goals or objectives.
Planning is make up of the following elements:
1. What is to be achieved (goals, targets, objectives)
2. How these will be achieved
3. Who will manage this process
4. The timeframe for achieving

3. The different types of business
planning
There are 3 different levels of business planning. These are:
Strategic planning
Tactical planning
Operational planning
Strategic planning is long term planning (2-5 years), it is usually done by senior management and
more than likely is planning done to achieve an organisations mission statement or ‘overall’ goals.
Its all about whole business planning.
Tactical planning is medium term planning (1-2 years). It is performed by middle management. It
works in conjunction with the strategic planning, in which once the strategic plan is formulated,
the tactical plan is steps toward achieving the strategic plan

4. Operational planning is short term planning (could be
daily, weekly, fortnightly). It is performed by front line
management. It involves everyday decisions that will
meet tactical goals and ultimately strategic goals.

5. Complete activity 6.1 into your workbooks.

6. The business plan
The business plan is the formalised planning a business undertakes on a periodical basis. Several
functions of a business plan include:
To define goals and the direction of the business
To assist with obtaining finance
To help keep the business on track
To help set achievable goals and aims
To help estimate costs
Allows you to assess strengths and weaknesses

7. Components of a business plan
The components of a business plan include:
A cover page
An executive summary
A mission statement
A business profile
Outline of products sold
A marketing plan
An operational plan
A financial plan
Any appendices

8. The executive summary
The executive summary is an overview or
summary of the key points of the business plan,
it is always at the start of the document, but is
usually written last. It is a great way to ‘sell’ the
business to a possible financer as it allows them
quickly to see if the business is worthwhile in
one page. The executive summary must be very
persuasive due to this reason.

9. The mission statement
The mission statement is a statement of the overall aims or purpose of the business, where it is
headed and how it views itself. A mission statement should contain the following elements:
A statement about the intended market type and customer type
Reference to products/services sold
Reference to location and areas it wishes to serve
A brief and simplified philosophy of the business, or what things the business finds important
such as values and aspirations.
Complete activity 6.2 into your workbooks.

10. The business profile
Is a brief profile of the business and should contain the following information:
Goals/objectives
Rational for why the business exists and why it will succeed
List of business principles and directors
Outline of business structure
Location/s
Outline of experience/qualifications/skills the business possesses
Description of main activities/products offered
Unique features of the business that’s sets it apart from its competitors (or the completive advantage)
The date it is/will be established

11. Products and services
Products and services will detail the products and/or services the business will
offer, the following information should include:
Diagrams/plans of new products in detail
A description of competitive edge (def. Pg. 95 of text)
A brief description of any possible future opportunities and developments, as
well as any possible barriers or threats that could threaten to slow/halt entry into
your market.

12. The marketing plan
This is usually one of the larger sections of the business plan, it is the plan which sets out the marketing objectives
and strategy to be undertaken by the business. It includes:
A description of the market in which the business will operate. (inc customer demographics).
An industry analysis including such factors as size of the industry and its parts, number of businesses in the
market, number of people employed in the industry, size of the industry, average operating hours, average profits,
legal matters, trends.
Current market trends
Profile of businesses customer market
Strengths and weakness analysis (SWOT)
Pricing structure
Methods of sale and distribution
What marketing strategy you intend to adopt and why

13. Complete activity 6.3 into your workbooks

14. The operational plan
The operational plan is to provide detailed information about the people and
processes that the business will utilise in order to achieve its goals. It
includes:
Regulatory strategy, which specifies exactly how the business intends to
comply with all laws and regulations (more info page 97).
The production processes the business will undertake
The quality assurance systems the business will implement. This includes
such things as Quality control (definition page 98 of text).

15. Please complete activity 6.4 into your workbooks.

16. Financial plan
The financial plan is to provide a statement of financial feasibility and potential
viability of the business. It should include such things as:
Analysis of current financial situation of the business
Income and expenditure projections for the first 5 years of the business
Estimated profits and losses based off these projections
Forecast of expected cash flow in 5 years
A break even analysis

17. Appendices
This will include any further information that you may
think would help cause:
Brochures/pamphlets
Market research
And articles that would help

18. End of Chapter
Please complete chapter
summary questions