The art of business planning
Every human ambition is founded on a desire to achieve certain goals, and these goals may be life-long or set within a timeframe in the near, mid, or distant future. It is also a fact that short-term ambitions may be crucial in the journey of realizing long-term goals. Like human beings, corporate entities also have ambitions. These ambitions are usually headlined in the entity’s identity – that is – its name, vision, mission, and objectives. However, as Antoine de Saint-Exupery avers, “A goal without a plan is just a wish”.
It, therefore, goes without saying that to realize these goals or ambitions it is important to define them clearly, understand the prevailing context as it relates to these, and break them down to such an extent that they are tangible and projectable. By doing this, desired milestones/projects can then be superimposed on a timeframe and actual planning can be started by targeting the logical flow of these milestones. More detailed planning is required once a particular milestone becomes urgent on the timeline – this is business planning.
Business planning can be carried out internally within the enterprise and/or with the assistance of an independent advisor that has relevant credentials in this area. The main benefit of working with an independent advisor is that they bring objectivity to the table and their minds are not crowded with sentiments on the project or the desired results. They also bring along with them insights derived from previous similar endeavors and can provide commercial benchmarks on some of the most critical business drivers.
Routine and regular planning is important at operational, tactical, and strategic management levels both for defining yardsticks for performance in terms of implementation, monitoring and evaluation of the different aspects of the business, as well as for defining and addressing attendant funding requirements of any venture or ambition. It is critical for informing the refinement of business models, products and processes and as such should be viewed as a core function of the enterprise. Planning should be the first and perhaps most important investment of time for any enterprise. Akin to sharpening an axe before felling a tree, planning is a core part of any project preparatory phase.
The business planning process should seek to address key critical issues including an elaboration of the envisaged project’s/venture’s concept; an examination of the market environment – the macroeconomic influences, sector-specific issues, value chain dynamics, the competitive landscape, regulatory regime, and investment code; strategy on market and price; as well as an elaborate financial appraisal. Sensitivity analysis should be done on the main business drivers to test the resilience of projected results. Additionally, key performance indicators should be defined during this process as these are very crucial for monitoring and management.
Napoleon Hill says “Plan your work and work your plan”. The best plans are those that are implemented, not those that stay on paper perpetually. It is therefore important that the developed business plan is adopted for implementation. Implementation requires the use of resources (monetary and otherwise), and as such efficient mobilization of these should be done to ensure cost-effectiveness all through the project’s lifetime. These resources can be obtained internally or externally, and if the latter is the case, then options exist on the nature, source, terms and conditions that apply. These can be explored with the help of an independent advisor.
Once resources are mobilized and the project infrastructure is readied, then operations can start. The key variables assumed in the business plan ought to be watched closely especially in light of the macro-economic environment as it evolves. This is important because it helps to apply corrective measures timeously whenever necessary.
The writer is a corporate and project finance specialist at Frontier Advisory Partners.