Business Plans

The Annual Business Plan is usually an offshoot of a formal Strategic Plan in the case of most large organisations. In the case of smaller SME’s the 'Annual Business Plan' tends to flow out from a general strategic direction decided by the SME owner(s), and is usually a simple budget that captures the revenue drivers of the company and the costs incurred in the business.

A formal business plan deals with the organisation in its present context, examines the current market environment, the special needs and competitive positioning of the industry it operates in, and the operating  and financing costs that it must bear, to manage the business in the short term.

A short term strategic appraisal usually in the form of a SWOT analysis is normally used to decide the competitive advantage of the firm, that is both profitable and sustainable.

The annual business plan by itself needs to be supported by a formal financial plan with a projection of the company’s cash flows for the year. Larger organisations and some mid-sized SME's, particularly those operating in the manufacturing and service sector, drill down the Annual Business Plan and the supporting Financial Plan, to functional level plans for managing specialised areas like marketing, operations, logistics etc.

Key benefits of using business plans are:

1.    Staff are given an opportunity to understand the short (and sometimes a little of the long term) strategic positioning of the company, are encouraged to contribute to the plan,  and as a consequence, have a say and even take ownership of the firm's strategy

2.  A formal planning process permits the firm to measure its performance on a monthly and year to date basis and take mid course corrections if they need to. (See Performance Management)