Business planning
Long-term, short-term planning (business planning) is one of the most important mechanisms and instruments of business management, which predetermines and predicts its efficiency in the future. Preparation of a business plan will allow the management team to more effectively use funds and assets of the enterprise and use planning for competent management.
The most rapid and adequate response to market changes, internal infrastructure will increase the company’s competitiveness and propel it to the top in the keen struggle for consumers.
Corporate planning is a way of modeling of the business development, indicators of business environment: production and supply of products, consumption and use of resources, market of products and prices, costs and results, cash flows and performance.
Result of planning is a plan drawn up and approved by the company’s management team.
Plan is the implementation process of measure (type of activity, technology, business development) developed for a certain period and including its objectives, content and indicators.
Corporate planning is subject to objectives (targets), which together with ultimate purpose of maximum profit extraction include other, such as:
- increase of volume and structural improvement of sales;
- increase of efficiency of output products, its stock list and assortment;
- upgrading of technical level of production assets and operational procedures;
- reduction of the company’s detrimental effect on the environment and elimination of its consequences;
- capital structure improvement;
- improvement of payment for labor and increase of its efficiency;
- enhancement of efficiency of natural and material resources use, etc.
Thus, the essence of planning is contained in justification of the upcoming economic purposes of development and forms of economic activity; choice of the best ways of their implementation on the basis of the most complete determination of required by the market types, volumes and terms of release of goods, execution of works and provision of services and establishment of such indicators of their production, distribution and consumption, which in case of full use of scarce production resources may lead to achievement of qualitative and quantitative results expected in the future.
In the vast majority of cases, as it happens in our country, business plan is to be prepared, when there is a need to attract investments. The main purposes, for which the business plan is to be prepared, are justification of necessity to attract additional investments or borrowed funds, demonstration of opportunities that the firm attracts attention from investors and banks, persuasion of them in the fact that the investment project has a sufficient level of efficiency and high level of company’s management team.
In such case each investor and/or business owner wants to assess the profitability of investment in the proposed business and estimate balance between potential benefit from business and risk of investments, and the best way to do this is to examine and analyze the company’s business plan.
Business plan gives to investor and/or business owner an answer for the question, whether to invest in this business and under what conditions it will be the most effective within risk capacity.
If the enterprise does not have a business plan, it indicates a low professional level of the enterprise management. In addition, it should be noted that enterprises are frequently working according to the business plan detached from reality.
Consequently, after preparation of the business plan, the enterprise becomes more efficient and manageable, what allows predicting more accurately the situation in the future.
Business planning is necessary measures that are carried out while creating a new line of business, new company, as well as while determining the initial strategy or in case of necessity to make adjustments in the company’s activities. Development of business planning is an important process that requires a multidisciplinary analysis of not only production, but also economic activity.
The most important functions of corporate planning include:
- plan as the economic forecast;
- plan as the basis for control of activities;
- plan as means of management of the company;
- plan as the foundation for development of strategy and goals of the company.