A well-written business plan can be a game changer for any business. Taking the time to properly plan and articulate your business’ goals and objectives and how you are going to meet them will give you the best chance at achieving business profitability.
By the end of this chapter, you will understand:
- The purpose of business planning
- How to articulate a business’ goals and objectives
- The differences between goals and objectives
- What financial information to include in a business plan.
There are two types of business plans a business may write:
- A feasibility study: Its purpose is to determine whether or not a business idea is viable or worthwhile. A feasibility study is usually centred around data and calculations to see whether a business idea stacks up against the financials it would cost to develop and implement. Its focus is usually on market demand and the probability of profit.
- Goals and objectives plan: This is used by businesses to clearly articulate their goals and objectives, while giving consideration to the various factors that may impact the business in achieving those goals.
This Learner Guide will focus mostly on the second type of business plan.
Benefits of business planning
One of the key benefits of business planning is in the process itself. It will force a business owner to carefully examine all aspects of a new or existing venture and understand the enterprise more thoroughly and how it can be improved or developed into the future.
Some of the benefits of business planning in a small business include:
- Exploring alternative options to current challenges (financial, employees etc.)
- More efficient use of resources (assets, money and people)
- Improved sales
- Reduced costs
- Improved cash flow challenges
- Faster decision making and boost productivity
- Improved employee morale
- Ability to attract talent staff
- Ability sharpen competitive edge
Further Reading
Read the following article by Jennifer Bridges on the Project Manager website to find out more about what a feasibility study is and the steps to undertake one:
Types of Business planning
A well-designed business plan template will force the writer to consider how various factors can be navigated carefully for ultimate business profitability.
There are six (6) types of business planning that a business can carry out. As a result of each of these planning processes, a detailed plan will be created.
For the purposes of creating a business plan, it is important to understand these different types of planning as many of them are foundational components of a business plan.
Feasibility planning provides information about the details of a new venture and how well a product or service might sell, if a proposed market exists and whether it will provide a return on investment. It is used when an enterprise is wanting to establish whether it is feasible to pursue a particular new venture before investing too much time or money in the venture.
Strategic planning details the strategies that an enterprise will use to achieve its longer term goals. During the strategic planning process an enterprise will define its mission, vision, critical success factors and strategies to achieve its long term goals. It is usually conducted for internal purposes only and provides a foundational plan for an entire enterprise. It provides a clear direction from which short term operational goals will be set and aligned in the operational planning process.
Operational planning considers the a 12 month (annual) time horizon and defines the day to day processes, procedures and activities in detail needed to achieve the strategic goals set in the strategic planning process. Operational planning is used to provide details of the responsibilities or management, departments and employees and how these tactical (short term goals) contribute to the overall enterprises success.
Financial planning considers how the enterprises financial resources are going to be used to achieve the strategic and operational goals. It details if any external funding is required and options around where this would be sourced. Financial planning is important for all stages of business planning as it considers the financial implications of the planning, whether it is during a feasibility study or on-going financing needs for the day to day running of the business.
Marketing planning is when an enterprise defines its marketing strategy, evaluates its current marketing activities and develops a plan to reach its marketing goals. It is used throughout the entire life of an enterprise. It helps to identify your target market, determine your required funds, differentiate your product/service from the other, reach your target market and increase your user base.
Contingency planning provides a strategy for the business to avoid/prevent damage or loss, and manage the impact of an unfortunate incident/event. Contingency planning is used to identify, prepare, respond and recover from an unplanned incident or event.
The "Six-Step" Process of Developing a business plan
- Determine what your plan is for
- Prepare your finances
- Write your summary last
- Get help
- Review your plan regularly
- Protect your plan
The three (3) main factors that can affect the structure of your business plan:
- The purpose of the plan
The purpose of a business plan is to outline the company’s goals and strategies and the steps needed to reach them. Depending on the goals and the strategies, the plan’s structure will be different. - The target audience
The target audience is the group of people that have been identified as potential customers for the company. Depending on the target audience, the structure of the plan will be different. - Desired outcomes
Desired outcomes are the goals that a company wishes to achieve. Every business aspect should contribute to achieving these outcomes, and therefore it is important that the structure of the company’s business plan aligns with these outcomes.
When creating a business plan (or even earlier, when the business idea is being formulated), it is important to research market need. If there appears to be a need in a particular market, then creating a business plan may reveal a market opportunity.
- There may be a need in a particular market due to various factors. These include:
- There is a requirement or need for a product or service that does not yet exist
- Growth in desire for a product or service due to trends
- Existing products or services are underperforming
- A product or service can be tailored towards a niche (for example, women- only gyms)
- A product or service can be performed produced or performed at higher quality
- A product or service can be performed produced or performed at lower cost.
The above factors may help you decide on a target market. When deciding on your target market, it will pay to determine market size. This is easier when the product already exists as you can research competitors to gain insights. Researching competitors will also allow you to build your own competitive advantage to entice customers to buy from you over another provider.
To determine the size of a market, you will want to research who your competitors are selling to and how successful they are. Some information sources that provide insight into your competitors are as follows:
The easiest way to find information on competitors is to visit their website. However, a website provides a one-dimensional view, and you do not get to understand the true wants and needs of customers. That said, you may be able to find some useful information such as strategic plans and performance reports.
You will gain a lot from visiting the social media pages of your competitors. Not only will you be able to see the types of people that follow the business, but you will see the questions they ask, the posts they interact with and much more. Importantly, you will get a feel for whether people want the service and if it is thriving.
Internet reviews may be written or fabricated by anyone, including the business itself, or its competitors. Therefore, whilst the information should be taken lightly, you can still get a feel for any specific or recurring compliments or concerns, and even how the business deals with its feedback and complaints.
There are some businesses and institutions who offer competitor analysis reports, usually for a fee. These businesses use cutting- edge analytical algorithms and systems to scan information and prepare reports based on certain criteria.
Once you have decided on a target market, you will want to research everything about them. Understanding your market’s needs, preferences, behaviours, and spending habits will allow you to market your products and services in a way that is most likely to grab their attention.
Understanding your target market and market size will help you to plan various business factors including the types of products you want to provide, the volumes and the price point.
It is also a good idea to invest in reputable market research reports. A good market research report allows you to discover myriad insights, including everything from what suburbs have the highest number of young families to what time your target market is most active on social media. Market reports offer invaluable insights into your target market’s behaviours, which will help steer your business planning activities.
Example
For some examples of trend and competitor analysis and reporting tools, visit the Think With Google website, which lists various digital marketing tools offered by Google:
'Your Digital Marketing Toolbox'
Website
For further information on how to research your market, visit the following Business.gov website, which provides with information from the Australian Government:
Goals
Usually, the first element of a business plan relates to the business’ goals. The goals of a business are what it hopes to achieve over the short, medium or long term. Goals are usually high-level aspirations that can be broken down into a series of objectives and tasks.
The goals of a business are the foundation for why that business exists and what drives it to succeed. There is no right or wrong way for a business to express its goals; however, goals can often be articulated through a vision statement or stated as business goals if there are multiple goals to be achieved.
Wherever possible, goals should be written using the SMART methodology. That is, they should be Specific, Measurable, Achievable, Realistic and Timely. When developing SMART goals, consider whether they meet the test below:
Is your goal specific in terms of what, when, how, why and where?
Is your goal able to be measured in a tangible way? Do you have a baseline to measure from? What data will you use to track progress?
Is the goal achievable in the means you have available, including within your budget and timeframes?
Is the goal realistically able to be achieved, or do you need to adjust some aspects of it? It is great to set stretch targets, however these can also be demotivating if they are unrealistic.
Is the goal going to be achieved at the optimum time, taking into account market needs and trends? For example, if a product is trending now, and you want to compete in that market, but it will take a year for your prototype to be completed, will your product still be in need, or will it be old news by the time it hits the shelves? Or does your product launch coincide with a particular season? For example, releasing scarfs and mittens in the middle of Summer will probably yield poor results.
Objectives
As mentioned above, objectives are linked to business goals, but provide a more detailed description of how the goal will be achieved. Usually, the way in which an objective is written provides the reader with an understanding of what a successful outcome would look like.
A well-written objective can be measured in a tangible way. To make your goals and measures tangible, it is a good idea to use baseline information and data metrics.
Baseline information is the information you will use as your starting point. It is information from a specific point in time that will be compared against future results to show how far the business has come in achieving its goals.
Data metrics is the information you keep on how you are progressing with a certain activity. It is this information that will allow you to compare how far you have come since your baseline. For example, if your objective is to deliver 100 samples of product to hairdressers, your data metrics may be a log of how many samples you have delivered each day. This information can be compared on a day-by-day basis against your baseline to see how you are progressing, what your average delivery rate is and how many you have left to deliver compared to your deadline.
Website
Learn more about determining your objectives in this article by Entrepreneur Asia Pacific:
Examples of a goal, objective and measure are provided below:
| Goal | Objective | Measure |
|---|---|---|
| Break our products into the hairdressing market. |
Each sales representative to visit ten hairdressers by August to deliver samples. |
30% uptake in product by hairdressing salons by September. |
Key Point
Remember, when creating objectives:
- An objective provides more detail than a goal about how the goal will be achieved
- The objective demonstrates to the reader what success may look like
- The objective should be measurable.
Further Reading
To further understand the differences between goals and objectives, read the following article by Michael O’Neill for Samewave:
In a Nerd Wallet article, Lauren Schwahn describes a budget as, ‘…a way to balance income, expenses and financial goals for a specific length of time’.
Each business will have a set budget for delivering its goals and objectives. Each activity that the business undertakes in achieving these outcomes is likely to cost money. Therefore, it is very important that budget is allocated to each service provided and managed closely. If a business does not weight its budget in the right areas, it may severely impact the success of the business.
Website
For simple instructions on how to develop a budget, including access to budget templates, visit the Moneysmart website:
Use the following questions to check your knowledge:
- Goals contain more detailed information than objectives.
- True? False?
- Explain what SMART stands for.
- List three key points relating to objectives that were discussed in this chapter.
- List two scenarios where a need may be required in a market.
- Identify four sources of information that provide insight into your competitors.
