limitation of preparation of business plan

Module 3: Planning and Mission

Pros and cons of planning, learning outcomes.

• Explain benefits of planning.
• Explain the drawbacks of planning.

Achieving business goals starts with planning.

Planning is the process of setting goals and defining the actions required to achieve the goals.

Planning begins with goals. Goals are derived from the vision and mission statements, but these statements describe what the organization wants to achieve, not necessarily what it can achieve. The organization is affected both by conditions in its external environment—competitors, laws, availability of resources, etc.—and its internal conditions—the skills and experience of its workforce, its equipment and resources, and the abilities of its management. These conditions are examined through a process called a SWOT analysis. (SWOT will be discussed in greater detail in another module.) Together, the vision and mission statements and the results of the situation analysis determine the goals of the organization. This idea is illustrated by the figure that follows.

Using the mission, vision, and values of a company, along with situation analysis, can help the company set goals.

The rest of the planning process outlines how the goals are to be met. This includes determining what resources will be needed and how they can be obtained, defining tasks that need to be done, creating a schedule for completing the tasks, and providing milestones to indicate progress toward meeting goals. The planning process will be discussed in more detail in the following section.

Benefits of Planning

In today’s chaotic environment, planning more than a few months in advance may seem futile. Progress, however, is rarely made through random activity. Planning does provide benefits that facilitate progress even when faced with uncertainty and a constantly changing environment. Some of the benefits include the following:

• Planning provides a guide for action. Plans can direct everyone’s actions toward desired outcomes. When actions are coordinated and focused on specific outcomes they are much more effective.
• Planning improves resource utilization. Resources are always scarce in organizations, and managers need to make sure the resources they have are used effectively. Planning helps managers determine where resources are most needed so they can be allocated where they will provide the most benefit.
• Plans provide motivation and commitment. People are not motivated when they do not have clear goals and do not know what is expected of them. Planning reduces uncertainty and indicates what everyone is expected to accomplish. People are more likely to work toward a goal they know and understand.
• Plans set performance standards. Planning defines desired outcomes as well as mileposts to define progress. These provide a standard for assessing when things are progressing and when they need correction.
• Planning allows flexibility. Through the goal-setting process, managers identify key resources in the organization as well as critical factors outside the organization that need to be monitored. When changes occur, managers are more likely to detect them and know how to deploy resources to respond.

Practice Question

Drawbacks to planning.

Planning provides clear benefits to organizations, but planning can also harm organizations if is not implemented properly. The following are some drawbacks to planning that can occur:

• Planning prevents action. Managers can become so focused on planning and trying to plan for every eventuality that they never get around to implementing the plans. This is called “death by planning.” Planning does little good if it does not lead to the other functions.
• Planning leads to complacency. Having a good plan can lead managers to believe they know where the organization is going and how it will get there. This may cause them to fail to monitor the progress of the plan or to detect changes in the environment. As we discussed earlier, planning is not a one-time process. Plans must be continually adjusted as they are implemented.
• Plans prevent flexibility. Although good plans can lead to flexibility, the opposite can also occur. Mid- and lower-level managers may feel that they must follow a plan even when their experience shows it is not working. Instead of reporting problems to upper managers so changes can be made, they will continue to devote time and resources to ineffective actions.
• Plans inhibit creativity. Related to what was said earlier, people in the organization may feel they must carry out the activities defined in the plan. If they feel they will be judged by how well they complete planned tasks, then creativity, initiative, and experimentation will be inhibited. Success often comes from innovation as well as planning, and plans must not prevent creativity in the organization.

Goals and plans do not have to be formal documents. In small organizations, they may exist only in the minds of the manager. But research and experience have shown that planning brings clear advantages to an organization, whether through formal procedures or informal intuition. However, when plans become the object instead of a means to an objective, they can have negative consequences for the organization. For example, General Motors missed the opportunity to become the first American automaker to produce an electric car because it was committed to its plan rather than its goals. GM had EV-1 prototypes designed and produced in the 1990s and literally destroyed the cars rather than sell them.

Contribute!

Improve this page Learn More

• Pros and Cons of Planning. Authored by : John/Lynn Bruton and Lumen Learning. License : CC BY: Attribution
• Image: Planner. Authored by : NikolayFrolochkin. Located at : https://pixabay.com/en/diary-weekly-planning-notebook-2134248/ . License : CC0: No Rights Reserved

The Disadvantages of Business Planning

• Small Business
• Business Planning & Strategy
• Business Plans
• ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
• ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
• ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">

Business Planning as a Function of Management

How to write a conclusion on disaster management, what are the functions of a business plan.

• How Can a Company Keep Its Strategic Plan Dynamic?
• Corporate Development & Planning

It was Benjamin Franklin who immortalized the words “by failing to prepare, you are preparing to fail.” Then again, the wise sage died 128 years before the pandemic of 1918 and 230 years before the Coronavirus pandemic struck in 2020. As the only founding father to have signed all four of the planning documents that established the United States, small-business owners like yourself might be wondering what Franklin, in all his wisdom, would say about the wisdom of short-, long-term and strategic planning. After all, an uncontrolled “external event” like a pandemic can knock any carefully researched, thoughtfully written plan right off its mahogany stand. Then what?

Plan with a Purpose

Of all people, Franklin would have been able to impart valuable lessons to today’s small-business owners about the value in preparing for the immediate and long-term future. He was instrumental in four key planning documents, including the Declaration of Independence and the U.S. Constitution. The Constitution continues to be a “living document,” guiding decisions in all three branches of the federal government.

On a smaller scale than creating a new government, there are many advantages to planning for your small business, according to Lumen Learning . Planning can direct action, which can be invigorating as it coordinates activities to ensure specific outcomes are achieved. It can rouse motivation and commitment to a cause. Once people know where they’re headed, they’re much more likely to fall into line.

Planning can also set performance standards and benchmarks so it’s easier to periodically review goals and objectives. It improves the likelihood of resource allocation, almost like a falling domino. Often the biggest obstacle to any big idea are the resources necessary to move off of square one; planning can give any big idea a sense of urgency.

Note the Disadvantages of Planning

As small-business owners now know, a pandemic is just one external factor that can upend the potential advantages of planning. Political unrest, strikes and natural calamities are other such factors. But if you confine this exercise to internal factors alone, the disadvantages of planning still add up quickly. Management Study Guide notes that these disadvantages include:

• inflexibility – a feeling that you must adhere to the plan and never deviate
• discouraging creativity, innovation, initiative and experimentation after the plan is set
• breeding a false sense of security and tunnel vision, stemming from putting too much stock in the plan and not seeing or reacting to changing conditions
• blinding employees to opportunities that were not foreseen and addressed
• being a time consuming process, requiring research, analysis and interpretation
• being expensive, drawing resources away from a business when they could be used on other things
• being rendered obsolete or irrelevant in a heartbeat

Manage the Disadvantages of Planning

One lesson runs consistently throughout this list: Planning should be a fluid process, constantly monitored and adjusted so that the plan remains timely and relevant. But back up the reality check one step further. Simply producing a planning document is no guarantee it will trigger results – no more than purchasing several bags of groceries guarantees a spectacular dinner. Many ingredients go into the outcome.

If you've weighed the pros and cons of planning and are feeling ambivalent, IgniteSpot Accounting says you may wish to try tempering the disadvantages of planning by a few methods. Feed your business' short-term goals into its longer-term goals. They should peacefully co-exist. Hold up all goals against your mission and vision statements to test them for relevance.

Involve employees in the planning process, and encourage them not to hold back. Make sure to integrate deadlines and defining roles and responsibilities – inclusions that are often left out of plans. (Is it any reason, then, that they fail to produce?) Plan for benchmarks that force you to stop and evaluate how the plan is doing, as well as milestones that your employees can celebrate.

You can also hire a consultant to come in and help if you feel as though a plan has run off the rails. Sometimes all that's needed is a quick fix by an outsider – who can see things dispassionately – for the plan to get back on track. Finally, plan (yes, on top of planning) for pivots, not just mere distractions. Pivots require a swift change in direction, not just an acknowledgment that “Ah yes; things have changed.”

It's entirely possible that the last tip may be one of the greatest lessons of the COVID-19 pandemic – and a crucial teaching moment for small-business owners who wish to create their own "living documents." Franklin, a businessman himself, could probably identify. As he said: “Either write something worth reading or do something worth writing.”

• History.com: Benjamin Franklin
• Lumen Learning: Pros and Cons of Planning
• Management Study Guide: Disadvantages of Planning
• IgniteSpotAccounting: Why You Should Set Better Long-Term Goals

Mary Wroblewski earned a master's degree with high honors in communications and has worked as a reporter and editor in two Chicago newsrooms. Then she launched her own small business, which specialized in assisting small business owners with “all things marketing” – from drafting a marketing plan and writing website copy to crafting media plans and developing email campaigns. Mary writes extensively about small business issues and especially “all things marketing.”

Related Articles

Strategic planning at all organization levels, challenges of strategic planners, what is the importance & purpose of a business plan, how to analyze the key success factors for plan implementation, the relationship between planning & organizing, external environment swot analysis, the best practices in strategic implementation, what is the difference between strategic planning & strategic implementation, how to conduct an effective planning meeting, most popular.

• 1 Strategic Planning at All Organization Levels
• 2 Challenges of Strategic Planners
• 3 What Is the Importance & Purpose of a Business Plan?
• 4 How to Analyze the Key Success Factors for Plan Implementation

Home » Pros and Cons » 14 Pros and Cons of a Business Plan

14 Pros and Cons of a Business Plan

Should you create a business plan? Most people will say that you should have at least some sort of outline that helps you guide your business. Yet sometimes an opportunity is so great that you’ve just got to jump right in and grab it before it disappears. If you want funding or growth to be sustainable, however, there is a good chance that you’ll need to create a business plan of some sort in order to find success. Here are some of the pros and cons of a business plan to consider as you go about the process of creating and then running your business.

What Are the Pros of a Business Plan?

A business plan is a guide that you can use to make money. By understanding what your business is about and how it is likely to perform, you’ll be able to see how each result receive can impact your bottom line. With comprehensive plans in place, you’ll be prepared to take action no matter what happens over the course of any given day. Here are some more benefits to think about.

1. It gives you a glimpse of the future. A business plan helps you to forecast an idea to see if it has the potential to be successful. There’s no reason to proceed with the implementation of an idea if it is just going to cost you money, but that’s what you do if you go all-in without thinking about things. Even if the future seems uncertain, you’ll still get a glimpse of where your business should be.

2. You’ll know how to allocate your resources. How much inventory should you be holding right now? What kind of budget should you have? Some resources that your business needs to have are going to be scare. When you can see what your potential financial future is going to be, you can make adjustments to your journey so that you can avoid the obstacles that get in your way on the path toward success.

3. It is necessary to have a business plan for credit. In order for a financial institution to give you a line of credit, you’ll need to present them with your business plan. This plan gives the financial institution a chance to see how organized you happen to be so they can more accurately gauge their lending risks. Most institutions won’t even give you an appointment to discuss financing unless you have a formal business plan created and operational.

4. A business plan puts everyone onto the same page. When you’re working with multiple people, then you’re going to have multiple viewpoints as to what will bring about the most success. That’s not to say that the opinions of others are unimportant. If there isn’t any structure involved with a business, then people with a differing opinion tend to go rogue and just do their own thing. By making sure that everyone is on the same page with a business plan, you can funnel those creative energies into ideas that bring your company a greater chance of success.

5. It allows others to know that you’re taking this business seriously. It’s one thing to float an idea out to the internet to see if there is the potential of a business being formed from it. Creating a business plan for that idea means you’re taking the idea more seriously. It shows others that you have confidence in its value and that you’re willing to back it up. You are able to communicate your intentions more effectively, explain the value of your idea, and show how its growth can help others.

6. It’s an easy way to identify core demographics. No matter what business idea you have, you’re going to need customers in order for it to succeed. Whether you’re in the service industry or you’re selling products online, you’ll need to identify who your core prospects are going to be. Once that identification takes place, you can then clone those prospects in other demographics to continue a growth curve. Without plans in place that allow you to identify these people, you’re just guessing at who will want to do business with you and that’s about as reliable as throwing darts at a dartboard while blindfolded.

7. There is a marketing element included with a good business plan. This allows you to know how you’ll be able to reach future markets with your current products or services. You’ll also be able to hone your value proposition, giving your brand a more effective presence in each demographic.

What Are the Cons of a Business Plan?

A business plan takes time to create. Depending on the size of your business, it could be a time investment that takes away from your initial profits. Short-term losses might happen when you’re working on a plan, but the goal is to great long-term gains. For businesses operating on a shoestring budget, one short-term loss may be enough to cause that business to shut their doors. Here are some of the other disadvantages that should be considered.

1. A business plan can turn out to be inaccurate. It is important to involve the “right” people in the business planning process. These are the people who are going to be influencing the long-term vision of your business. Many small business owners feel like they can avoid this negative by just creating the business plan on their own, but that requires expertise in multiple fields for it to be successful. A broad range of opinions and input is usually necessary for the best possible business plan because otherwise the blind spots of inaccuracy can lead to many unintended consequences.

2. Too much time can be spent on analysis. Maybe you’ve heard the expression “paralysis by analysis.” It cute and catchy, but it also accurately describes the struggle that many have in the creation of a business plan. Focus on the essentials of your business and how it will grow. Sure – you’ll need to buy toilet paper for the bathroom and you’ll want a cleaning service twice per week, but is that more important than knowing how you can reach potential customers? Of course not.

3. There is often a lack of accountability. Because one person is generally responsible for the creation of a business plan, it is difficult to hold that person accountable to the process. The plans become their view of the company and the success they’d like to see. It also means the business plan gets created on their timetable instead of what is best for the business and since there isn’t anyone else involved, it can be difficult to hold their feet to the fire to get the job done.

4. A great business plan requires great implementation practices. Many businesses create a plan that just sits somewhere on a shelf or on a drive somewhere because it was made for one specific purpose: funding. When a solid business plan has assigned specific responsibilities to specific job positions and creates the foundation for information gathering and metric creation, it should become an integral part of the company. Unfortunately poor implementation has ruined many great business plans over the years.

5. It restricts the freedom you once had. Business plans dictate what you should do and how you should do it. A vibrant business sometimes needs its most creative people to have the freedom to develop innovative new ideas. Instead the average plan tends to create an environment where the executives of the company dictate the goals and the mission of everyone. The people who are on the front lines are often not given the chance to influence the implementation of the business plan, which ultimately puts a company at a disadvantage.

6. It creates an environment of false certainty. It is important to remember that a business plan is nothing more than a forecast based on plans and facts that are present today. We live in a changing world where nothing is 100% certain. If there is too much certainty in the business plan that has been created, then it can make a business be unable to adapt to the changes that the world is placing on it. Or worse – it can cause a business to miss an exciting new opportunity because they are so tunnel-visioned on what must be done to meet one specific goal.

7. There are no guarantees. Even with all of the best research, the best workers, and a comprehensive business plan all working on your behalf, failure is more likely to happen than success. In the next 5 years, 95 out of 100 companies that start-up today will be out of business and many of them will have created comprehensive business plans.

The pros and cons of a business plan show that it may be an essential component of good business, but a comprehensive plan may not be necessary in all circumstances. The goal of a business plan should be clear: to analyze the present so a best guess at future results can be obtained. You’re plotting out a journey for that company. If you can also plan for detours, then you’ll be able to increase your chances to experience success.

Related Posts:

• Start with Why 3 Minute Summary: 15 Lessons Learned + PDF
• 25 Best Ways to Overcome the Fear of Failure
• Good to Great Speed Summary: 15 Core Principles of…
• 7 Realities About INTP and INFP Relationship…

Limitations of Business Plan

Project report or business plan is a written statement of what an entrepreneur proposes to take up. It is one kind of course of action about what the entrepreneur hopes to achieve in his business and how is he going to achieve it.

The business plan is only a plan and does not assurance achievement. For example, sales may be lower than predicted as they can be affected by a range of issues. There are some limitations to the business plan. This is why those plans can’t be successful. These limitations or pitfalls are as follows:

• Lack of realistic goals: Some entrepreneurs set such goals that are not attainable;
• A problem in determining time-period; if the plan is too rigid some problems may arise, it must be flexible to adapt to market changed.
• Failure to anticipate a future problem;
• Lack of sufficient information;
• Lack of commitment: Starting is good but the spirit of an initiative declines;
• Lack of practical experience;
• Lack of alternative plan;
• Insufficient knowledge about the market;
• No consideration of SWOT: SWOT means strength, weakness, opportunities, and threats;
• Unnecessary delay in project report formulation and implementation;
• A problem in priority consideration;
• Lack of efficient manpower;
• Lack of flexibility;
• A wrong assessment of the market.

Understanding this and how to avoid or correct is key in determining the overall success of any plan.

Major Entrepreneurial Competencies for successful entrepreneur

Entrepreneurs are born, as well as made – explanation, advantages or benefits of small business, various psychological factors that affecting entrepreneurship development, barium sulfide – an inorganic compound, distinguish between normal and abnormal idle time, exercise regimen reduces liver steatosis and stiffness in patients, what is natural satellite and artificial satellite, each star determines its own mass, landslide as disaster, latest post, better instruments are essential for discovering life on mars, hercules, the eagle, the black hawk, and many other aircraft are revealed in microsoft flight simulator – blackbird, the achievement of artemis 1 will allow people to return to the moon, aluminium monostearate, brain function is harmed by traffic pollution, according to research, periods and pregnancy are still taboo in women’s football.