Every year, thousands of new businesses see the light of the day. One look at the World Bank's Entrepreneurship Survey and database shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.
According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.
Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.
Several other statistics expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.
Which isn’t surprising at all. Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms (a whopping 67%) don't have a formal business plan in place.
It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap.
A business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one businesses are struggling with right now, the post-pandemic world.
But before you can go ahead and develop a great business plan, you need to know the basics.
In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2024 and the Future.
Now before we begin with the details of business planning, let us understand what it is.
What Is a Business Plan?
No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.
More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.
A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained.
However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes.
What Is Business Planning?
Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.
What Are the 4 Types of Business Plans?
The following are the four types of business plans:
Operational Planning
This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.
Strategic Planning
Strategic plans are all about why things must occur. A high-level overview of the entire business is include in strategic planning. It is the organization's foundation and will dictate long-term decisions.
Tactical Planning
Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined.
Contingency Planning
When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.
Do you have all or any of these in place? If you need help, we are here to help and support you. We want to see you WIN. Reach out to us.
We hope we have been able to introduce you into the beautiful Art of business planning, be you a startup or a well established organisation, we hope you do find this useful.
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