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Why Is Strategic Planning Important?
- 06 Oct 2020
Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?
If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.
It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .
Here’s a look at what strategic planning is and how it can benefit your organization.
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What Is Strategic Planning?
Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.
It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.
“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”
Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.
Related: 4 Ways to Develop Your Strategic Thinking Skills
Benefits of Strategic Planning
1. create one, forward-focused vision.
Strategy touches every employee and serves as an actionable way to reach your company’s goals.
One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.
This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.
2. Draw Attention to Biases and Flaws in Reasoning
The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.
A few examples of cognitive biases are:
- The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
- Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
- Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways
One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.
If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.
Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.
Related: 3 Group Decision-Making Techniques for Success
3. Track Progress Based on Strategic Goals
Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .
By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.
It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.
Improve Your Strategic Planning Skills
Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.
Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).
Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.
Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.
About the Author
More From Forbes
Why your business-planning process is more important than the plan itself.
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Shane Jackson, President of Jackson Healthcare , a $1.5 billion healthcare staffing and technology company built on a values-led culture
Kelvin Murray 2015
There is an old adage that no battle plan survives contact with the enemy. Or, as Mike Tyson is famously known to have said, “Everybody has a game plan until they get punched in the face.”
I don’t know about you, but I feel like all my plans for the past two years were punched. It’s that time of year again where so many businesses are kicking off the New Year with fresh plans and budgets. I have written a lot of business plans over the years and created many, many financial forecasts. There was one thing that was consistent about all of them: They were all wrong.
Here’s the thing: Plans are based on assumptions. I make plans for dinner based on the assumption that my family will eat with me. Then I learn my teenage kids have made other plans to hang out with their friends. I made an incorrect assumption. Now, what do I do with all these groceries?
Business leaders have never faced as many unknowns as they have during the pandemic. Just when we think we are starting to get some certainty back, we add inflation, supply chain issues and Covid-19 variants. As a result, planning is harder than ever.
You might be tempted, as I have been lately, to just throw planning out the window completely. Why take the time to do a financial forecast when changes in the pandemic could make it irrelevant in 30 days?
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But I would argue the answer is not to stop planning; it is to do more planning.
Put aside for a moment that plans and budgets can be necessary for pesky things like resource allocation. The real value of planning lies in the questions you must consider when creating the plan. Who is your customer? What are their needs? How can you best solve their problems? What should you be paying attention to in the market? What can you learn from your latest successes and failures?
The business plans I’ve written in the past weren’t wrong because I’m not good at my job or because I had bad ideas or reached bad conclusions. They were wrong because the information I had when creating the plan was limited and sometimes incorrect. I had hypotheses about how the market would react but not proof. I made an assumption that the way a small group of customers behaved was representative of the way the rest of the market would behave. I thought I could hire people with certain skills at a specific time but had not yet done so.
As leaders, we are sometimes lulled by the notion that we can run our businesses as though we can forecast the year ahead with complete accuracy. We create business plans assuming we know everything about the market, exactly what the solutions are to the market problem we want to solve, and exactly how our people and processes will act in delivering those solutions. Then we take this plan and put it on a shelf to collect dust until perhaps we pull it out to reference in next year’s plan. Or, worse, we actually operate the company using it.
Perhaps you’ve had a conversation that goes something like this: “Hey, we’ve got this great new product that will really boost sales. Can we hire this person to help us get it to market faster?” And you find the answer is, “No, sorry; we created a budget 14 months ago and that position isn’t in there. Wait another three months for your meeting with the CFO, and maybe you can get it approved.”
I believe the most important part of writing a business plan is the process, not the plan itself. Planning shouldn’t happen once a year; it should happen all year long. The questions one attempts to answer in strategic planning should be asked and answered as often as you have new information.
A big part of leaders' job is to build a rhythm of learning in their organizations. Make sure you are instilling disciplines that force you to regularly work on the business — versus working in the business — in a way that helps you identify and challenge the assumptions behind your decisions. What has changed in the market or in your ability to deliver? You built this plan thinking one thing, but then discovered that something else actually happened. Now, how do you react?
The ripple effect of the pandemic has created an environment that forced all of us to become more agile. Let’s codify that agility into our businesses and all become better planners, all year long.
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Why Planning Is Important (Explained)
By: Author Paul Jenkins
Posted on May 4, 2022
Categories Business , Entrepreneurship , Focus , Productivity , Purpose
When it comes to planning, most people think of things like schedules and organization. While these are important aspects of effective planning, there’s much more to it than that! Good planning can help you achieve your goals and dreams by keeping you on track and focused – in business, and in life. Here are just a few reasons why planning is so important.
Why Planning Is Important
Plans are important. Although they may seem like an onerous mechanism designed to burden you with strict regulations and stressful deadlines, the planning process can actually be a liberating force that opens your mind to new possibilities and helps you put your ideas into action.
If you stay flexible and dynamic enough, planning can become a way of life. Your plans will change depending on the situation – and like life itself, they won’t always work out the way you hoped. But if you know how to adapt at all times, there’s no reason things can’t turn out for the best.
Planning is important in business and management because it gives companies a firm structure for their future so that their activities are consistent and organized.
Planning is also important in education because it helps students study for exams or complete assignments and learn more about certain subjects by preparing them with easy-to-understand information before the actual exam takes place.
Why Is Strategic Planning Important in an Organization?
Planning is critical for any business. In most cases, companies that don’t have a mission and vision are doomed to fail – because, without goals, there are no targets or actions to guide the company.
Without a plan, it’s almost like you’re flying blind in the dark or playing without a net – which can lead to unpredictable results. And remember, we all know what happens when you shoot in the dark: You usually hit something hard.
So … why is strategic planning important?
Because it enables organizations to achieve their strategic goals and achieve them well. It helps them prioritize and allocate resources effectively – leading to greater efficiency and a higher standard of living for all.
Of course, it takes time to create an effective plan, but when it’s done well, every organization benefits from having it in place as soon as possible, even if there are no immediate benefits at first glance.
Planning Is a Way to Stay Goal-Oriented
Setting goals is one of the most important things you can do as a business leader because they help you stay focused. Planning allows you to create a good structure and keep your team on task.
Once you’ve set your goals, it’s time to develop a plan that will help you achieve those goals.
A good business plan gives direction to your business and serves as a source of inspiration for everyone involved in your business. It provides an overview of what’s going on in the business and how it plans to achieve its goals.
If you don’t have this kind of clarity, it’s much harder for your employees to know what their specific jobs are or how they contribute to the company’s overall mission.
Your business planning doesn’t have to fill several volumes and require a group presentation before it’s approved by all the managers in your organization-you can quickly create it on your own or with a handful of members of your team who’ve relevant experience in the field (or all by yourself if you’re ambitious).
Even though large companies use complex planning methods, that doesn’t mean small companies have to. Even if you just write down a few key points about why certain strategies are effective and what results they’re likely to produce, it can be easier to write down an idea like this when you’re trying to figure out which avenues are worth pursuing next.
Long-Range Plans Provide the Guidance Needed to Meet the Goals of An Organization
For organizations to survive and thrive, they must make good long-term plans. Otherwise, their goals won’t be achieved or they’ll not be able to keep up with the rapid changes the world is currently experiencing.
For plans to be effective, they must be aligned with an organization’s goals.
In addition, a plan is only complete if there are measures to track progress. Long-term planning requires good communication within an organization so that everyone involved understands what needs to be done and how it fits into the big picture.
For example, if you were in charge of a mail delivery company, your plan might include hiring new employees who’ve good interpersonal skills so they can better deal with customers and solve problems that arise. If you include too much detail in your plan or try to cover too many areas without focusing on what’s most important to the success of your business, you could run out of time and resources before you get anything done.
Whether you’re running a small business from home or a large company with thousands of employees around the world, being able to plan for the future will help you keep up with growing demands and changing trends.
Without thoughtful, long-term planning, a business won’t be able to survive in today’s fast-paced global marketplace. Good planning is critical when dealing with organizational change.
It Helps an Organization Meet Its Objectives and Missions
Most companies have a mission statement, sometimes more than one. But what does it mean?
A mission statement is the reason for a company’s existence. It describes what the company wants to achieve and what values guide its behavior. Mission statements usually begin with the words “Our mission is…” or “The mission of [company name] is…”. They’re meant to be inspirational, visionary, and even poetic.
Mission statements are often confused with corporate goals.
A corporate goal describes how you’ll achieve your mission. For example, “Increase our sales by 30% over 2 years” would be a goal of the chief executive officer (CEO) of a chain of toy stores who wants to grow his business.
The CEO might say to his team, “Our mission is to increase sales by 30% over time. To achieve that goal, I want us all to focus on selling more toys.” Although the goal may follow from a discussion of the mission, these are different things, and goals don’t always have to follow directly from an organization’s stated purpose.
The Importance of Strategic Planning
What’s strategic planning?
Strategic planning may sound like a highfalutin term from the business world or something only large corporations need to worry about, but a strategic planning process is actually something every organization can use.
Let’s take online publishing, as an example.
The concept itself is pretty simple: you look at your team and your goals, and then design either a written plan or a visual graphic – the best way to achieve those goals. This way, you can identify what’s working and what could be better in clear steps.
Strategic Planning to Support and Engage Your Audience
The first step in strategic planning is to figure out who your audience is and where they’re going.
Once you’ve done that, you can tailor your content to their interests (and keep them engaged by avoiding the most common social media marketing mistakes). For example, if one of your followers likes Game of Thrones, they might also be interested in posts about medieval weaponry.
Next, think about how you can best communicate with these people.
Do you create short videos? Longer blog posts? Or do you want to set up an email list so people can get information from just one place? If it helps you organize things, take note of how often and when certain posts are optimal – maybe Facebook Live works best in the morning, or maybe Twitter conversations thrive on Tuesday evenings.
Also, think about how much time each strategy will take – some tactics require more energy than others!
Then, once you’ve got everything planned out and all the details ready to go, don’t forget to document it all somewhere. A masterful strategic plan should have some sort of record so everyone knows exactly why things are happening the way they are!
An Effective Business Plan Provides a Roadmap for Success
An effective business plan aims to achieve one or more of the following goals:
- To help attract investors by showing that your company is stable has lots of potential and will yield a high return on investment
- To help you secure financing by providing lenders with financial information about your business
- To guide the management team as they make day-to-day decisions about how to run their business and conduct the organizational activity
- To help you anticipate challenges so you can better manage them as they arise
Of course, if businesses didn’t need plans, it wouldn’t be a bad thing! Having a plan can take time away from other important tasks, like running your business and making money for yourself.
However, most large companies in the United States have written formal business plans that outline their goals for the future and methods for achieving them.
Therefore, it’s safe to assume that if professional businesses include formal plans in their operations, small businesses can benefit from planning as well-at least enough to provide an outline for success but not necessarily an exhaustive guidebook to managing every aspect of their company on a daily basis or down to the last decimal point in Excel spreadsheet projections.
Why Is Planning Important in Management?
Planning is an essential part of management. It helps the company set goals for the future, sets a course to sail from the present into the future, and helps keep things organized and efficient as time passes.
Most organizations will have at least one project manager dedicated to this job.
Planning also sets the course for communication and decision-making within an organization. Daily planning and effective project management ensure that everyone knows what needs to be done and when it needs to be done, helping the business run more smoothly from day to day.
Finally, project planning helps with accountability- when you’re not just making decisions off the cuff, you’ve concrete records of how those decisions have impacted your business (or personal life) in the past, which can help you make better decisions in the future.
A plan may seem like a dull affair at times, but once you realize that it pays off over time, it becomes one of your most valuable tools for staying in control of your situation.
What Should Be Included in a Business Plan
A business plan is a document that clearly communicates the mission, purpose, and goals of your business. The first and most important section of the business plan is the executive summary. This is what investors will read to decide if they want to invest in your business.
To get where you want to go, there are some important things to consider:
- First, how does your business or idea fit into the world?
- What is the business idea?
- What makes it special and different?
- Then, who are your customers or clients?
- What problems do they have that your service or product can provide a solution for?
- You should also take a look at the competition – who’s doing the same thing?
- How is your business better than theirs?
Business Plans Help Facilitate Communication, Establish Priorities, and Set Smart Goals
Planning is important, and your business plan should be the foundation for it. This document lays out your company’s organizational goal, priorities, goals, and strategies (both short and long term) so that everyone involved can work toward the same goal. It also ensures that nothing falls through the cracks.
Good communication is at the heart of good planning, and the implementation of a plan:
- It helps you communicate with others about what your business does and how it does it. Collaboration is an effective way to make smart decisions, improve productivity and quality of work, and increase the success of your business.
- It sets priorities for your team . You can create a plan based on several possible goals that are most important to you – such as increasing revenue or improving customer service – or based on industry standards or benchmarks, such as industry-specific revenue goals.
- It helps you plan your human resource management and the effective funneling of innovative ideas.
- For each goal, you’ll specify exactly what results you want to achieve and by when. You can then use milestones to track progress against those expectations. This gives you insight into where you stand and allows you to re-evaluate if you need to make adjustments.
- This allows you to be flexible with your goals, leaving room for changes that depend on circumstances such as seasonal demands or economic changes beyond your control. While you’ll keep an eye on key performance indicators to make sure no one strays too far from their goals, having some wiggle room gives you more opportunity to adjust when things go wrong and seize opportunities when something unexpected happens that could bring great new value to your organization (or rather, “your” organization).
- In short, a plan helps keep everyone working together toward a common goal while leaving room for spontaneous developments along the way.
Proper Planning for All Areas of Your Business Can Help You Achieve Your Goals
Planning is important in every area of your life, but especially in business. When you create a good plan, you think about the future you want to achieve and lay out steps to get there. It’s the roadmap to ensuring you meet important goals.
In planning, you ask yourself questions and think honestly about what’ll help you achieve your goals. When you have a plan, you’re prepared for unexpected difficulties.
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Importance of Planning in Business Management
Planning is one of the most important tasks in business or any type of management as well. It is really does not a matter of the size of the business. Does not matter if it is a profitable or non-profitable business organization you are going to start, a planning is a must. Why? The reason is that the planning is the first element of the four core elements of management. It is very easy to start a business, but without proper planning it will fall apart soon after the inception. So, p laning is one of the most important works an entrepreneur must do.
Table of Contents
I have listed top reasons why planning is important in business organization. Below the important points are discussed.
Planning for Uncertainty
Uncertainty is a common phenomenon for every type of profitable or non-profit business organization. When you do not have any knowledge of any future event, then it is called to be an uncertainty. Here a business plan comes with a solution. A business plan is a future course of actions. That means you enlist a set of work you will be doing after launching the business. You know your steps. Now you know what you will be doing throughout the business life cycle. By pointing out your future actions, you are avoiding many uncertainties. For example, maybe you do not know how you will find an effective employee for your organization. But in the plan, you mentioned that the recruitment process will be handled by a third party. It will surely reduce the uncertainty in the future.
Reducing the Business Risk
Risk is the chance of happening a thing that may bring profit or loss for your business. Risk deals with chances. That means it’s about the probability. You cannot be completely sure of an event. For example, a flood may occur in the beginning of the year which may result in decrease in sales. Business risk will always be there. Here plan plays an important role. A business plan includes a list of events that may or may not take place in the future and a set of solutions. So, if those problematic events take place, the business owner goes for a solution. So, you know the solution for a set of problems. In this way, an effective business plan is very much important for your business.
Planning for a better Growth
A business does not stand alone is the same place year after year. It needs to grow. Why? Because, if a business does not expand, you cannot increase profit after a certain amount. So, you need your business grown. A business plan tells you when you will want to inject more money in your business, that’s investment plan. You want to take loan for your business? When do you want to do that? After reaching few certain goals? Do you want to take more investors? Or you just want to borrow from your relatives? A business plan creates a timeline for the future investment which ensures a future growth and results in increased profit margin .
Taking a Specific Action for your Business
We have already talked about that a plan is a set of future actions that you are going to execute. There are specific actions you will be taking for your business. A business plan enlists future business opportunities that might be utilized in the future. For that, a business might need to develop the strengths needed to utilize those opportunities in the future. By taking proper actions in the business, a company develops its strengths. For example, a specific action might be recruitment of a set of sale’s executive who will be working under the condition of sales commission when there is a chance of high sales growth. A business plan identifies specific action for your business.
Proper Management of Cash Flow
Managing cash flow is a vital task in a business organization. If you do not know how to utilize the cash flow, you might end up with losses. As a result, your business will fail. A business plan creates a financial plan. It tells you how you will pay the payment to your suppliers or how much credit will be there. It will also help you to maintain a good relationship with your suppliers if you go with your plan. Though it is very critical task, but still you must manage you cash flow according to your business plan.
Planning includes the SWOT Analysis
A business plan also includes a SWOT Analysis. The SWOT is an acronym. The elaboration of SWOT is the strengths & weaknesses of and the opportunities & threats for a business organization. So, it will help you to identify the strengths and weaknesses, not only for your business but also for your competitors’. It will also help to identify the opportunities & threats for your business. It will help you to compare your business with the business of your competitors. As a result, you will be able to be more competitive in your industry.
Valuation of the Business
A business plan tells about the value of the business. When you have the complete business plan, you know what can be the value of that business in future. Measuring the value is critical when it deals with the fair value. But an effective business plan certainly can tell you what might be the business worth of.
Efficient and Effective Use of the Resources
Resources are not unlimited. As every business has a limitation for the resources, those businesses want to utilize those resources efficiently. Low cost production can be achieved only if the resources are utilized properly. A business plan has a set of actions. So, you know how much resource you will need in the future. As a result, resource allocation can be done beforehand. For example, you may need to take a business loan. But why should you take the loan today if you start your production in the next week?
Enlisting the Short Term and Long Term Goals
Setting goal is one of the most important tasks in small or large sized business organization. Every business organization needs to set its short term and long term goals in the inception. A business includes a set of business goals. These goals maybe divided into short terms and long term goals. Short term goals are those goals that can be achieved within a very short period of time, perhaps a week or a month. Reaching the monthly target sale can be an example of a short term goal. On the other hand, capturing a large market share can be an example of a long term goal. For the both cases, the goals should be specific, reachable, and countable. A business plan specifies those goals. By setting up the goal, a business planner makes a way to the success of the business organization because everyone knows for what they are working in the organization. This is why an effective business plan includes a set of business goals.
Creation of Distinctive Advantages
A business plan helps you to identify the strengths and weaknesses of your business. This is exactly what you need to develop competitive advantages for your business. You may have one advantage that your competitors do not possess. For example, you have the ability to recognize an efficient employee in the interview board. But your competitors can not select the correct people for their organization. So, you can build an efficient workforce which may lead to a distinctive advantage.
Determine the Future Recruitment
As a business plan has an expansion plan in it, it has the recruitment plan as well. If you know the time when you are going to inject more fund into your business, you also know how many people you will have to recruit to look after the new operations.
A Gateway to the Feasibility Study
A business plan is the complete set of actions that you will execute. You perhaps soon will start your business. But how do you know that the business will bring profit for you? Do you have any confirmation for it? Here the feasibility study comes to play the next role. The feasibility study assesses the practicality of the business plan. It will examine the business plan, and tells you if the business will be able to make the profit or not.
Additional Reading on the Significance of Business Planning
What are the essential elements of a business plan.
According to the QuickBook, a business plan must have 7 elements. Those are the executive summary, business description, market analysis, organization management, sales strategies, funding requirements, and financial projections.
What are some Uses of Business Plan?
The most important uses of an effective business plan are sticking to the plan, understanding the pressure points, dealing with the possibility of failure, managing more investment, taking loans from venture capitalists, selling the plan, and many more.
What is the Importance of Planning in Management?
Planning is the first priority in a business. In management, the planning give you the opportunities to set the future course of actions.
Why Planning is Important in Life?
Without making and following a plan, a person may fall apart. Passing a life without a proper plan is like meaningless. Planning helps us to select future course of actions, organizing our lives, setting up the proper directions, and achieve desired goals. Without planning, our lives are like buildings with weak pillars.
What is the Importance of Planning in Education?
Planning for education is one of the most important tasks in our lives. The most important reasons are financial supports, selection of institutions, achieving a desired goal, reaching a target career, and finally, uses of knowledge for a better world.
What is the most popular Quote by Peter Drucker on Planning?
One of the strongest quotes I encountered in my life is by Peter F. Drucker, – “Unless commitment is made, there are only promises and hopes; but no plans.”
We have elaborated most important points on the importance of business planning. Without a business plan, a business person is totally blind. If the person does not have a plan, s/he does not know what to do next. In every step he takes, he needs time to make a decision. But if there is a business plan, there is certainty.
The Importance of Planning in an Organization
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- Business Planning & Strategy
- Importance of Business Plans
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Writing an Organization's Goals & Objectives
Analytical tools for developing a strategic plan, definition of a successful strategic business plan.
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Planning helps an organization chart a course for the achievement of its goals. The process begins with reviewing the current operations of the organization and identifying what needs to be improved operationally in the upcoming year. From there, planning involves envisioning the results the organization wants to achieve, and determining the steps necessary to arrive at the intended destination – success, whether that is measured in financial terms, or goals that include being the highest-rated organization in customer satisfaction.
Efficient Use of Resources
All organizations, large and small, have limited resources. The planning process provides the information top management needs to make effective decisions about how to allocate the resources in a way that will enable the organization to reach its objectives. Productivity is maximized and resources are not wasted on projects with little chance of success.
Establishing Organizational Goals
Setting goals that challenge everyone in the organization to strive for better performance is one of the key aspects of the planning process. Goals must be aggressive, but realistic. Organizations cannot allow themselves to become too satisfied with how they are currently doing – or they are likely to lose ground to competitors.
The goal setting process can be a wake-up call for managers that have become complacent. The other benefit of goal setting comes when forecast results are compared to actual results. Organizations analyze significant variances from forecast and take action to remedy situations where revenues were lower than plan or expenses higher.
Managing Risk And Uncertainty
Managing risk is essential to an organization’s success. Even the largest corporations cannot control the economic and competitive environment around them. Unforeseen events occur that must be dealt with quickly, before negative financial consequences from these events become severe.
Planning encourages the development of “what-if” scenarios, where managers attempt to envision possible risk factors and develop contingency plans to deal with them. The pace of change in business is rapid, and organizations must be able to rapidly adjust their strategies to these changing conditions.
Team Building and Cooperation
Planning promotes team building and a spirit of cooperation. When the plan is completed and communicated to members of the organization, everyone knows what their responsibilities are, and how other areas of the organization need their assistance and expertise in order to complete assigned tasks. They see how their work contributes to the success of the organization as a whole and can take pride in their contributions.
Potential conflict can be reduced when top management solicits department or division managers’ input during the goal setting process. Individuals are less likely to resent budgetary targets when they had a say in their creation.
Creating Competitive Advantages
Planning helps organizations get a realistic view of their current strengths and weaknesses relative to major competitors. The management team sees areas where competitors may be vulnerable and then crafts marketing strategies to take advantage of these weaknesses. Observing competitors’ actions can also help organizations identify opportunities they may have overlooked, such as emerging international markets or opportunities to market products to completely different customer groups.
- “The Art of the Long View: Planning for the Future in an Uncertain World”; Peter Schwartz; 1996
- MITRE Corporation: Transformation Planning and Organizational Change
Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."
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Why Business Planning Is Important for Your Business Growth
How often do you include time to plan for your small business in your schedule? If it isn’t something that you do regularly, then let me encourage you to build some time into your schedule for planning.
Many people think that business plans are only useful for new businesses. But, as this article from the Small Business Administration states :
The truth is that business planning offers serious benefits for everybody in business.
In this post, I share the reasons why business planning is important for the success of your business.
I recommend that you start with high-level planning at the beginning of the year and then go into more detailed business planning every 90 days . Taking that time to plan the projects I want to tackle and the areas of my business that I want to grow has been vital to my own success.
Why business planning is important to make your business successful
Dwight D. Eisenhower once wrote in a letter “Plans are worthless, but planning is everything.” He went on to say that “the planning process demands the thorough exploration of options and contingencies.”
This quote sums up my thoughts about planning. Planning is not about creating a document (the plan), although that’s a helpful benefit.
Business planning is about thinking. The value lies in the process. When you spend time planning, you’ll think about your business in ways that you may not have thought about it before. You’ll look at it from different angles and consider the actions you want to take to make it successful.
Plans are worthless, but planning is everything.
Business planning helps you focus on the right things.
When you go through the planning process, you’ll decide what’s important for your business. This is enormously helpful when you get into the day-to-day grind. With a clear plan, you can focus on what’s most important, rather than spending time trying to figure out what you should be working on.
This is much more efficient than trying to decide what to do every day. When you do that, you generally spend your time putting out fires – dealing with the most urgent things on your plate.
With a plan in place, it becomes easy to work backwards to create efficient and effective weekly and daily to-do lists. Then you can focus on what really needs to get done each day. And that’s how you reach your goals.
Business planning encourages you to think outside the box
If you don’t step back and look at the big picture of your business from time to time, it’s easy to fall into a rut of doing the same things over and over again.
As you plan, you’re going to set goals, right? And generally, those are going to be big goals. Setting a big goal encourages you to think outside the box.
With a big goal in front of you, you start to think of ways to achieve it. You’ll get creative and think of things that didn’t occur to you before.
Business planning puts your subconscious mind to work
So far we’ve talked about the active elements of business planning, but there’s another element at play. Once you’ve started thinking about what you want to achieve and how you are going to do it, your subconscious mind keeps working on the problem.
While you are busy plowing through your to-do list, chauffeuring the kids around, or even sleeping, your subconscious is busy working on your plan.
Think about it. How many times have you awakened in the morning with the answer to a big question? Or had your best ideas come to you in the shower? That’s the power of your subconscious mind. Planning just points it in the right direction.
What is the purpose of business planning?
The purpose of planning is to make decisions about the future of your business. The purpose of a business plan is to document those decisions so that you can refer to them going forward or share them with other stakeholders.
You will establish your strategy
The main purpose of business planning is to establish your strategy. everything else in your plan will support the execution of your strategy., you will set strategic objectives.
Successful businesses set specific business objectives and then track and follow up on their execution. Without objectives, how do you know what you want to have happen?
Business planning allows you to be strategic and work toward the objectives that will be most helpful to your business.
You will allocate resources
While you are planning, you need to allocate resources in a way that will help you achieve your strategic objectives. What services do you already use to keep your business running? Are there new services you need in order to grow your business?
Also, think about assets that you may need to acquire or replace this year. Do you need a new computer or printer? What about software? Or maybe photographic equipment or a new cell phone.
And of course, as a solopreneur, your most precious resource is your time. Where will you spend it? Do you need to hire help?
The business planning process can help you clarify your thoughts about how best to allocate your resources.
You will decide what NOT to do
Just as important as choosing what objectives to pursue is deciding what NOT to do. You can’t do everything. There simply aren’t enough hours in the day. You have to decide what to let go of. Making realistic decisions about what you will and won’t do is an integral part of the business planning process.
What should you include when making a business plan?
There are certain elements that you’ll want to include in your business plan. Keep in mind, however, that this is your plan. If something doesn’t make sense for you and your business, it’s okay to skip it.
Your vision & mission for your business
Your vision and mission set a strong foundation for your business. Vision and mission express why you do what you do. They help you attract the right kinds of clients, keep your business focused on the right path, and get you through the tough times.
Do you have a vision statement and/or a mission statement? Vision and mission statements are a great way to start your business plan. They’ll help you keep your eye on the big picture.
How is your business monetized?
How is your business monetized? Do you sell physical products? Digital downloads or e-courses? Are you a service provider?
Which revenue streams are working well? Are there any that you want to drop? What about new revenue streams that you want to add to the mix?
A competitive analysis of your market
Do some basic market research. Figure out who your major competitors are, who they sell to, and what they offer.
It’s always helpful to know what the competition is up to.
And next year, when you do your annual planning, you’ll be able to make a comparison. Have your competitors changed? Who are the new players? What are the hot new products and services?
A quick SWOT Analysis
A SWOT analysis sounds technical, but it doesn’t have to be. Grab a big piece of paper or a white board and divide it into four sections. Then brainstorm your strengths, weaknesses, opportunities, and any threats your business is facing.
A SWOT analysis will make your business strategy stronger because it will ensure that you’ve thought about both internal (strengths and weaknesses) and external (opportunities and threats) factors.
What are your high-level goals?
For annual goals and objectives, it’s best to stay very high-level. This is not the place to go into too much detail, because priorities and activities will likely change throughout the year.
Include a few high-level, “must-do” goals in your business plan. These will likely include your revenue goal and a few other specific targets that you want to achieve.
For more information on setting goals, check out Ultimate Guide for How to Achieve Goals .
What is your marketing strategy?
Marketing is an important part of your annual business plan. How are you going to market and promote your business? Do you have a social media strategy ? Will you use paid advertising? Or public relations?
Include some information on your target market or your ideal customer. It can also be helpful to decide if your primary focus will be on acquiring new customers or on selling more to your existing customers.
Depending on your business, you may want to have a separate, more detailed marketing strategy document. If so, then you can simply include an executive summary of your marketing plan in your overall business plan.
Action Items to achieve your goals
Your business plan should include the specific actions that you will take. This is when you start getting into the nitty-gritty details. What are you going to do? By when?
For a deeper dive into what you should include, check out this post on how to create a strategic business plan .
Your business plan is a living document
At this point, I hope you see the importance of a business plan. Keep in mind that your business plan is a living document. It’s not written in stone. You can change it. Remember President Eisenhower’s remarks above. The plan itself isn’t the end-goal. The strategic planning process is where the true benefit lies.
If you are ready to create your own strategic plan, then be sure to download this free business planning workbook:
Want to remember this? Save Why Business Planning Is Important for Your Business Growth to your favorite Pinterest Board.
More content on strategy & planning that you may find helpful:
- How to Create a Results-Focused Strategic Business Plan
- How to See the Big Picture in Your Small Business
- Be a Goal Getter
- Why Is It Important to Have Vision and Mission Statements?
- How to Create Your 90-Day Action Plan
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