Planning Overview: Chapter 7

Chapter Seven: Introduction to Business Planning


It is foolish to operate a business without a plan, without any idea what you are trying to achieve or where you are going. It is like navigating without a compass––you never know where you might end up. Despite this, most business owners resist planning. They tend to be action oriented, and the task immediately before them is what gets their attention. Less than 5 percent of all businesses take the time to do any planning whatsoever.

Four reasons why business owners don’t plan

One: don’t know how to do it

It takes effort and a lot of thought to put together a business plan, and you may not know how to start. This chapter describes how to generate a strategic and financial plan for your business.

Two: don’t have time

The biggest excuse for not planning is lack of time. “I don't have time for that. I am already working ten to twelve hours a day, six or seven days a week, struggling to be successful in this business. The phone is always ringing. When am I supposed to find time to plan?” The answer is that in the long run, planning doesn't take time, it saves time. Instead of answering the same questions over and over, you answer them once. With a plan, you become proactive instead of reactive. Everything is more productive and efficient, giving you more time to devote to your day-to-day activities.

Three: fear

Fear of the unknown. Fear of being held accountable. Fear of not making your plan. When you put a plan down on paper, others can see it. They will know if you don't achieve it. They may be critical of your performance. Who needs this? It’s less stressful not to commit yourself in the first place. 

Good leaders expect and want to be held accountable. Establishing a written plan enhances communications with your leadership team and insures that everyone is on the same page, working to achieve common goals. Courage is required to be successful in business and that means doing something even though you are fearful.

Four: uncertainty

The business climate has changed a lot in the past few years, and it promises to change even more in the future. With the uncertainty that such changes bring, why bother to put together a plan? It is just going to be obsolete soon anyway.

Facing an uncertain future is a major reason to establish strategies, set goals and objectives, and develop a sound business plan.

Planning is important

Benefits include:

  1. Encourages management to consider and evaluate basic company policies.
  2. Encourages management to look ahead, to consider conditions that are likely to prevail outside the company.
  3. Promotes a team concept within the company.
  4. Provides for the most effective and economical use of labor, facilities, and capital.
  5. Promotes understanding throughout the company of the problems faced by each department.
  6. Serves as a means of evaluating progress or lack thereof toward stated goals.
  7. Provides a commitment to a plan of action.
  8. Instills in management at all levels the habit of carefully considering all factors before making a final decision.
  9. Avoids or minimizes costly mistakes or errors in judgment.
  10. Maintains the focus of the employees on the stated mission and objectives of the business.

Results of not planning

The lack of planning is often the cause of either serious problems or outright failure. Poor planning is estimated to account for over 90 percent of business failures. Learn how to develop a business plan, and invest time in this process. Don’t use one of the above excuses as a reason not to plan.

Elements of the Business Plan

Core Values

The planning process starts with a determination of the values of the business. What values drive your company? What does the company stand for? Once you have established your core values, make sure your employees know what they are. Put a plastic card in a stand on every employee’s desk. Post them in the conference room, lunchroom, and warehouse. Talk about them in staff meetings. This is who you are, and these are the values that you want and expect your employees to follow.

Vision statement

The Vision Statement is what you expect the business to look like at the end of three years. Amount of revenue? Locations? Services? Once you have your vision statement done, post it in your lobby, conference room, lunch room, and warehouse. Prominently display it where your employees can see it every day, and discuss it in staff meetings. Your employees will know what your vision is, where you are trying to go, and how they can best help you get there.

Mission statement

The mission statement should be a concise one or two sentence statement that reflects the main purpose or focus of the business. It answers questions like:

  1. Why does the business exist?
  2. What does the business do?

Once you have your mission statement done, post it in your lobby, conference room, lunchroom, and warehouse. Make sure it is prominently displayed where your employees can see it every day.

It does not have to be long. My company had a one sentence mission statement:

                           We help businesses achieve financial success.

 It is one sentence that explained why the company existed. It took two days to write it.

Organizational chart

Most business owners do not like to prepare a formal organizational chart because they want reporting relationships to be more flexible and not tied down to lines and boxes. That is okay for a small start-up business, but as the business grows it is necessary to be more formal. Who reports to who? Draw up an organizational chart if you have multiple reporting layers. Make sure everyone understands it, especially if there are dual reporting relationships (someone reporting to two different people). 

Strategic planning

Ignore strategic planning at your peril. The business environment is changing at warp speed and you need to determine how best to operate in that environment. Strategic planning is synonymous with long-term planning. What is happening to the overall environment of business in general and your industry in particular. How far into the future can you see and what are the implications of future change?

Assessing your overall business environment on at least an annual basis allows you to set effective long-term strategies. S.W.O.T. analysis involves an assessment of both the external and internal environments of the business, specifically Strengths, Weaknesses, Opportunities, and Threats.

The external environmental analysis (assessing opportunities and threats) consists of an assessment of the following items:

  1. The competition
  2. Legal/regulatory changes
  3. The economy
  4. The industry
  5. Social trends
  6. Emerging technology

You are identifying opportunities and threats that could possibly impact the business. Good business strategies take advantage of the opportunities and do everything possible to minimize the threats.

The internal environment analysis consists of an assessment of the following items:

  1. Personnel and management capabilities
  2. Physical capacity
  3. Financial capacity
  4. Products/services offered
  5. Sales and marketing
  6. Organizational structure

You are establishing a candid assessment of the strengths and weaknesses that the business may have. Good strategies take advantage of the strengths and opportunities and do everything possible to avoid the threats and strengthen the weaknesses. This exercise, referred to as a SWOT analysis, identifies the Strengths, Weaknesses, Opportunities, and Threats in your external and internal environments.

Strategic objectives

Setting strategic objectives is the next step, and they are often set in the following areas:

  1. Growth rate for revenue or profits
  2. Diversification plans
  3. Updating systems
  4. Acquisition plans
  5. Market share
  6. Implementing new programs

The objectives should be clear, specific, realistic, flexible, measurable, controllable, have deadlines, and assigned accountability. 


Objective:       Establish a plan for increasing the sales leads generated by the website.

Assigned to:   Frank Anderson.

Deadline:        May 1.

Monitor these objectives monthly. Monitoring is a key phase of the planning process. Do not put the plan on the shelf and forget about it until the end of the year. Nothing will happen, and you will have wasted a lot of time and effort.

Financial projections

Forecasting your income statement, balance sheet, ratios and cash flow is described in the next chapters. Use Business Mastery to accomplish these projections. This is short-term planning. Projecting what you expect to happen this year.

Capital expenditure plan

Business Equipment, an Excel-based workbook, is available to download on to assist in the capital budgeting process.

Sales plan

What are sales goals? Who? How? When?

Staffing plan

What staff will be either added or laid off? When? 

Monthly Monitor

Sit down every month with your leadership team and determine how the company is performing compared to the plan. Get explanations from key people or departments who are not performing as agreed. Make sure they are held accountable. Utilize Business Mastery for this.


The only constant in business is change. Nothing remains the same. Look at your strengths, weaknesses, opportunities, and threats at least annually. Reassess the overall direction of your business. Refine your vision, mission, goals, and objectives. Make sure you involve the key people in your company. Keep them informed as to where you are going and what you are trying to do.

Planning timetable

The following is a timetable for the planning process. If your fiscal year-end is not December, your timetable will begin and end in different months.

September      Begin to assemble information on the economy and the industry for the coming year. Ask your bank, trade association and CPA for help. Pay attention to what is written in the newspaper and what is said on TV. Use the Internet to help you get a handle on what the coming year looks like economically.

October          Ask your salespeople for their estimates on what they think they can do next year. Look at your numbers at the end of September, and begin to formulate a revenue forecast for the coming year.

November      Take your key management off-site for at least a day and formulate your strategic plan and preliminary financial plan.

December      Revise and update your forecasts for the coming year based upon your November numbers.

January           Finalize your strategic and financial plan for the year after you have reviewed your in-house December financial statements.


Business owners seldom take the time to plan. The phone is always ringing, and it’s easy to be consumed by the pressures of the tasks at hand. The fact is that planning does not take time; it saves time. You make decisions and set a course of action only once, instead of repeatedly. You are proactive instead of reactive. Invest your time and effort into this process, and your business will become more successful. Writing it down is halfway there.

There are some important aspects of the planning process:

  1. Make sure all the people who will be responsible for achieving the plan are involved in the planning process and are committed to the plan. This should not be dictated by owners and forced upon key employees on a top-down basis.
  2. Do not have your planning meeting at the company. There are too many distractions for it to be effective. Go off to a hotel or resort where you will have fewer distractions. Make sure everyone has their computers and phones turned off, and that they don’t check e-mail or voice mail during the meeting or at breaks. If necessary, they can check for messages and return calls after the end of the day.
  3. Include a social aspect to the meeting; cocktail hour and meals. Give your employees a chance to interact on a non-business basis and get to know each other better. This is the team that will help you achieve success, and the better they know, like, and respect each other, the more successful you will be.
  4. It is often useful to have an outside facilitator assist in this process. Seek out a business consultant for help and advice about this.
  5. Review the progress of the plan monthly. This is not something that should sit on your credenza until the end of the year. It is a dynamic process that needs to be reviewed constantly. Establishing a plan and then ignoring it during the year would be worse than not having a plan.

Business Mastery, an Excel-based workbook, is available to assist you in easily making your financial forecasts. Be sure to down load it at

Refer to Appendix II for the contents of a Business Plan.

The next chapter will describe how to project the income statement.

Keep on paddling!


David Duryee