‘How to Develop a Business Plan’
Most successful organisations have a clear vision or sense of purpose. They also have well defined objectives to aim for and a way of measuring their performance. These are the vital ingredients of a Business Plan. Some of the benefits of business planning are that it: • Forces people in the organisation to stand back, and review business performance and the factors that are affecting the business • Encourages people to consider strategic options and make informed decisions • Improves communication and builds commitment by involving people throughout the organisation • Can be captured in a single document and communicated to everyone involved.
Business Planning is a process that identifies where the organisation wants to be and by when, and shows how it will get there from where it is now. A Business Plan is a document that captures the outputs from the business planning process.
Key steps in business planning
The key steps in creating a Business Plan are:
1. Setting a vision for where you want to be
2. Gathering and analysing information about where you are now
3. Setting performance objectives and making plans to close the gap
4. Planning how to monitor progress.
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but its distinctive competence is in reporting issues that affect the residents in Warrington. Steve Jobs founded the computer company Apple on the basis of his vision of ‘a computer in every home’. For example. your staff. and that their competitors were selling other types of pens such as cheaper biros. It indicates the values and beliefs of the organisation and it lays down guidelines for the way in which the organisation carries out its business. for instance.gov. People will have different images of what could be in the future.uk
© Instep (UK) Ltd. Setting a vision for where you want the organisation to be
The core of your Business Plan is your vision for the future. mission statements need to provide enough detail to guide the preparation of the Business Plan. customers and other stakeholders must share and believe in it. Their competitors were not makers of other pens but manufacturers of other gifts.traintogain. Although your vision statement can be aspirational. • What is your distinctive competence or source of competitive advantage? The Warrington Guardian.
Tel: 08456 047 047 Web: www. . consider the following questions: • What business do you want to be in? When Parker Pens tried to define their business. The mission statement establishes the direction and purpose of the organisation. To create a mission statement.co. the Body Shop was founded on the principle of producing cosmetics that do not harm the environment or animals. • What are your values or beliefs? It’s obviously important to understand where your organisation will compete. for example.statements that your staff and customers recognise and are committed to achieving. but it’s equally important to consider how you and your staff are expected to behave. To be useful. Market research showed that most fountain pens are bought as gifts. Finally they need to be an accurate reflection of your organisation .uk Email: traintogain@businesslinksw. leather wallets. and so listening and consultation are key skills in developing a vision.Learning Resources 2005
. Organisations often set guiding principles on how they will work towards their vision by producing a mission statement.1. they thought their customers were buying pens to write with. competes against national newspapers in the region.
Your sales team will be able to tell you about customer service levels. The following list is not exhaustive but offers some ideas on the type of information you might need: • Products and services .Which market segments are more profitable? .Are there new developments in technology you can take advantage of? .traintogain.Learning Resources 2005
.How do they compare you with the competition? .uk Email: email@example.com
© Instep (UK) Ltd.Which have an expanding market share? • Markets .Do they meet the needs of your customers? .Do they know what is expected of them? .2a. Gathering information about the organisation
The information that you need for business planning will come from both inside and outside the organisation.Do you have the right people and skills to deliver your vision? . .How effective is your management team? • Resources .Who are they and what do they want? .Are there new market opportunities for your products? • People and their skills .What is their image of you and what is it based upon? .Which customers have you achieved most with and why? • Competitors .How easy is it for new competitors to enter the market? • External factors .What are the economic trends and how might they affect you? .Do you need additional equipment or premises? .What are their strengths and weaknesses? .What about price.gov.Are existing markets saturated? .Which are the most profitable? . service levels and quality? .Are there any technological advances that might affect you?
Tel: 08456 047 047 Web: www. A lot of it will already exist. For example your sales records will give you excellent data on the buying patterns and desires of your existing customer base.Are there any changes in legislation or political policy that are relevant? .How can you consider the environment in your Business Plan? .How effective is your supply chain? • Customers .Who are they? .What is your competitive advantage? .
traintogain. Opportunities and threats are to do with the business environment in other words.Learning Resources 2005
.largely because it is the least risky of the SWOT matches. Let’s take an example of a personnel agency that supplies contract printers and typesetters to in-plant and commercial printshops.
Strengths and weaknesses are to do with the internal capabilities of the organisation . opportunities and threats. SWOT is a simple but effective technique to analyse where the organisation is.uk Email: traintogain@businesslinksw. The business has been successful and is finding it difficult to meet demand for its services. SWOT Analysis for personnel agency Internal Strengths • Know personnel selection practices • Know the print industry • Strong sales force • Good client relationships.gov. Internal Weaknesses • Office too small • Not enough skilled labour on books • No cash to fund expansion • Contract staff need to update skills.2b. . Match your strengths with opportunities.in other words what it does well and what it does not do well. and what threats should it protect itself against.uk
© Instep (UK) Ltd. what opportunities exist that the organisation can take advantage of. External Opportunities • Growing demand for contract help • No local competition • Readily available applicants • Business loans available. How can you start to close it? The data from your SWOT Analysis can help you to generate some strategic options.
Tel: 08456 047 047 Web: www. There are four analyses you can make: i.co. and to help develop future plans.
Think about the gap between what the organisation wants to be and where it is now. Here the organisation has certain strengths that are appropriate for seizing specific opportunities. Analysing where the organisation is now
The SWOT Analysis is a helpful tool for putting the information into perspective. they found that their knowledge of personnel selection practice and the requirements of the print agency (both strengths) meant that they could quickly extend their bank of agency staff by interviewing their applicants. When the personnel agency looked for matches. It is a very attractive option . backed by government. External Threats • Competition may enter the market • Changing technology means skills are becoming obsolete • New legislation affects use of contract staff • Cannot meet customer demand. weaknesses. SWOT stands for strengths.
traintogain.uk Email: traintogain@businesslinksw. The good image and relationship that the agency has with its clients will help it to counter the threat from new competitors. The organisation needs to play fully to its strength so that the threat is countered. Here the organisation is being threatened in an area where it is already weak. The lack of available cash (a weakness) to develop the business can be overcome by developing a Business Plan. Match your weaknesses with threats.uk
© Instep (UK) Ltd. Match your strengths with threats. The organisation needs to assess just how attractive the opportunity is and balance this with the investment required to strengthen its skills and resources. and applying for a government backed loan (an opportunity). Here there are opportunities in the marketplace . but the agency would need to work out how to do this.co. The best strategy here is to develop the contractor base. Match your weaknesses with opportunities. iv.Learning Resources 2005
. As the agency is not developing its key contractors. . Here the organisation is threatened in an area where it has strengths.but the organisation does not have the skills or resources to exploit them. and fit within your mission? • Offer the most sustainable source of competitive advantage?
Tel: 08456 047 047 Web: www.gov. iii. it is vulnerable to the threat that a competitor might enter the market and offer enhanced skills.ii. Either the organisation needs to strengthen its area of weakness so that it can overcome the threat or it needs to consider whether this is an area of the marketplace in which it should continue to operate. Now consider which options are worth pursuing? Which: • Will have the most positive impact on your business? • Can you achieve? • Are attractive to your staff and clients.
money or time. • Realistic.uk
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CE RMAN PERFO TIVES OBJEC
• Measurable. Between three and eight is a manageable number. quantity.co. • Timebound in some way so you can stop and measure how you are doing. Do not create too many goals or you may lose focus. Objectives need to drive improvements in all business areas rather than being purely financial. by Autumn/Winter 2006.uk Email: firstname.lastname@example.org the tasks or actions required to achieve them. people. contributing to 10% of turnover.3. then think carefully about how you will explain the objectives to them.Learning Resources 2005
. Setting performance objectives
Now it’s time to get specific. • Agreed with the people who need to achieve them. Think about quality.traintogain. customer service and the areas that are important to delivering your organisation’s vision. but if they are totally unrealistic they can be demotivating. The organisation needs to decide exactly what it plans to achieve in a given timeframe. Effective objectives should provide a degree of stretch.gov. Effective objectives meet five criteria: • Specific stating specifically what you need to improve in terms of outcomes and results . Consult and involve your staff in the business planning process to gain their ideas and support. Objectives are the most effective way to do this. In the Business Plan we are concerned with those at corporate level. with success criteria that are measurable in terms of quality. .
Tel: 08456 047 047 Web: www. Examples: • To increase the number of staffed shops from 25 to 75 by converting unstaffed concessions by end of 2006 • To introduce an outsize range of jackets. If this is not possible.
Main Indicator Indicator 1 A strategy for improving the performance of the organisation is clearly defined and understood. Your business plan should be dynamic. Once you have established your goals and written the plan.
Tel: 08456 047 047 Web: www. Top managers make sure the organisation has a business plan with measurable performance objectives.uk Email: email@example.com. Think about how you will monitor progress as you create your Business Plan. Check the effectiveness of your Business Plan by working through the following indicators and associated evidence. Evidence: Top managers make sure the organisation has a clear purpose and vision supported by a strategy for improving its performance. Top managers make sure there are constructive relationships with representative groups (where they exist) and the groups are consulted when developing the organisation’s business plan. Managers can describe how they involve people when developing the organisation’s business plan and when agreeing team and individual objectives.traintogain. People can explain the objectives of their team and the organisation at a level that is appropriate to their role. six monthly. so that it is regularly updated (monthly. you will need to keep checking how well it is working. Here are some ideas: • Define milestones for your corporate objectives • Put in place an information system that will deliver accurate and relevant performance data to you so that you can monitor progress • Demonstrate senior management commitment to the plan • Make sure that everyone understands their role in implementing the plan • Reinforce the business objectives at regular intervals so that people don’t forget them • Let people know what progress the organisation is making. or whatever is suitable for the organisation). . People who are members of representative groups can confirm that top managers make sure there are constructive relationships with the groups and they are consulted when developing the organisation’s business plan. Planning how to monitor progress
Once your plan is underway.co.Learning Resources 2005
© Instep (UK) Ltd. and can describe how they are expected to contribute to developing and achieving them. three monthly.
A Business Plan and Investors in People
The Investors in People indicators provide a clear framework for the evaluation of an Business Plan.4. it is important that you review it. The organisation has a plan with clear aims and objectives which are understood by everyone. Be prepared to re-define your objectives and plans to reflect changing priorities and the business environment.
Managers can explain team learning and development needs.uk
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Tel: 08456 047 047 Web: www. the activities planned to meet them.Additional Indicators Indicator 2 Learning and development is planned to achieve the organisation’s objectives. .co. the plans and resources in place to meet them. their team and the organisation.gov. Evidence: Top managers can explain the organisation’s learning and development needs.Learning Resources 2005
.uk Email: traintogain@businesslinksw. how these link to achieving specific objectives and how the impact will be evaluated. People can explain what their learning and development activities should achieve for them. People can describe how they are involved in identifying their learning and development needs and the activities planned to meet them. how these link to achieving specific team objectives and how the impact will be evaluated.traintogain.