How to Start Your Business Planning Cycle
What is the business planning cycle?
The business planning cycle is a continuous process of creating, implementing, and reviewing plans to achieve business goals.
Businesses change over time. Sales grow and sales decline. Staff are hired and leave. Being in business can often feel as though you’re coming up against a brick wall. However whatever your business feels like now, there’s one thing you can guarantee about the future – and that is change.
This is what makes planning for the future so important. Both the internal and external conditions of businesses change all the time. While a general plan for the business might remain static in general terms (“we want to sell more apples by offering better products at lower prices than our competitors”), a more detailed plan needs to heavily lean on financial planning, a realm where continuous planning and re-evaluation is a necessity.
Business planning isn’t just in the preparation phase, it should be a constant, iterative process which guides the business as it grows and develops.
Steps of the planning cycle
The planning cycle typically consists of the following steps:
1. Current situation analysis
This involves understanding the current situation or problem that needs to be addressed. It includes analyzing data, identifying problems or opportunities, and assessing strengths and weaknesses.
You need to know the financial state of your business, ideally with at least a year’s history to see how you got to where you are, alongside the current market conditions and competitors. This will all help to identify your current positioning.
2. Goal setting
This involves establishing clear and specific goals that are aligned with the business’ mission and objectives. Goals should be measurable, attainable, relevant, and time-bound.
Look at several different scenarios for the future – at minimum three – a best case, average case, and worst case scenario will give you an indication of the levels of risk and additional demands you are putting the business under should it grow too slowly – or too quickly.
3. Strategy development
This involves developing a plan or a set of strategies that will enable the organization to achieve its goals. Strategies should be based on the situation analysis and should take into account the strengths and weaknesses of the organization.
What does the business need in order to scale up? What are the financial ramifications of growing larger? Again, be realistic. Don’t let anything critical to the growth of the business lie solely on inflated sales predictions.
4. Action planning
This involves identifying specific actions or steps that need to be taken to implement the strategies. Action plans should be detailed, with specific timelines and responsibilities assigned to individuals or teams.
This involves executing the action plans and carrying out the strategies. This step requires effective communication, collaboration, and coordination among all stakeholders.
Keep in mind that your best resources are the team you are working with. Are they getting the training they need to excel at their roles?
6. Monitoring and evaluation
This involves monitoring progress towards achieving the goals and evaluating the effectiveness of the strategies. Data should be collected and analyzed regularly to determine whether the strategies are working and whether any adjustments need to be made.
7. Revision and adaptation
Based on the results of the monitoring and evaluation process, the business may need to revise its goals, strategies, or action plans to ensure that they remain relevant and effective. This step involves continuous learning and adaptation to changing circumstances.
Why is the planning cycle important?
The planning cycle is important for several reasons:
Establish goals and objectives
The planning cycle allows businesses to set clear goals and objectives that guide their decisions. This provides a sense of direction and purpose, enabling the business to focus its resources on achieving its objectives.
The planning cycle also helps businesses to identify the resources needed to achieve their goals and objectives. This includes financial resources, personnel, and other assets that the business may need to acquire or allocate.
With the planning cycles businesses can anticipate potential risks and challenges that may arise during the course of their activities. By identifying these risks in advance, businesses can develop contingency plans and take steps to mitigate or avoid them.
The planning cycle provides a framework for communication and coordination within the business. This includes setting clear roles and responsibilities, establishing timelines and deadlines, and ensuring that everyone is on the same page.
Monitoring and evaluation
The planning cycle also includes monitoring and evaluation activities that allow businesses to track their progress and adjust their strategies as needed. This helps businesses to stay on track and achieve their goals efficiently and effectively.
Struggling with the planning cycle?
There are many different reports that can help to plan your business. MIS reports are important because they provide businesses with valuable information that can be used to make informed decisions. Cash flow forecast reports can help to plan your financial future. However, a financial modelling tool will consolidate all of these different entities.
A financial modelling tool can ensure that all key financial components are consolidated – simply needing a few data entries to be entered throughout the software in order to forecast and predict various financial scenarios. Enjoy a free demo of Brixx, or sign up today for a foundations account.
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