Even if it is not yet common practice, especially in smaller businesses, to prepare a business plan, you should definitely take action here. It is true that it always involves additional effort to prepare a well-founded plan. But the benefits that your company can achieve through planning usually clearly exceed the effort, as the following explanations and examples show.
1. Clarity about basic goals and intentions
The first purpose of business planning is to get clarity about your own goals and intentions for the coming year, for example, realistic sales figures and the funds required to realise sales or important investment projects. You should also formulate what you would like to achieve beyond this period in the next approx. three to five years, e.g. product developments, gaining new customers, opening up new markets, exporting, offering additional services or developing new unique selling points.
Practical tip: Resources are always in short supply, whether it is staff, materials or finances. Therefore, you should always plan in such a way that especially profitable products are further promoted in a targeted manner. But new products must also be provided with sufficient resources until it is clear whether you can earn money with the product or not. After all, new developments in particular ensure that you will be able to generate sufficient sales and profits in the years to come.
2. Transparency in figures and data
Only in the second step should you back up the goals and assumptions with concrete planning figures. These should provide answers to these questions, among others:
- What are the expected sales volumes and prices?
- What costs will arise?
- What other payment-relevant transactions are there?
- What investment volume must be planned for?
- What funds (in euros) should be made available for advertising and new developments?
Liquidity planning and price calculation as well as the calculation of profit margins or contribution margins for products and services are also part of planning. In the operative area, the planned figures are broken down into months. With this “denomination”, special features, such as phases with higher or lower sales, can be better represented, and it is clearly recognisable when which sales revenues, costs and other payment-relevant transactions, e.g. repayments or tax arrears, are to be expected. The monthly view also has the advantage that comparisons of planned and actual figures can be made at short intervals during the year.
Practical Tip: If possible, you should plan sales, material consumption and gross profits for each item individually. However, if there are dozens or hundreds of products, this is often too time-consuming. In this case, it is recommended to plan per product only for particularly profitable articles and to combine and plan all other articles in groups.
Your tax consultant can help you identify high-yield and low-yield products and services with the help of a simple ABC analysis.
3. Central business management control instrument
For you, corporate planning has the further advantage that, with planning and, if possible, monthly target/actual comparisons, you have a powerful business management control instrument that shows you on an ongoing basis how things are going in your business or how you are performing,
- how things are going in your business or
- whether and, above all, where there are significant deviations from the goals and plans.
Early detection of these deviations enables you to intervene in a targeted manner and at short notice and to prevent negative developments.
Practical tip: The distribution of the target figures over months has proven itself in practice. The sooner you recognise a deviation in the target figures, i.e. the goals, the sooner it is possible to achieve the originally planned goals through short-term intervention. Excel planning tools can provide valuable assistance in this regard.
4. Information and communication tool
Business planning is an important and central instrument for convincing interested third parties of the performance and goals of your own business. If you need a bank loan, you must in any case present a plan today, not only for the coming year, but also for the following three to five years.
But also larger companies (customers) who place orders and are interested in a longer-term cooperation increasingly insist that a supplier can prove what he is successful with and wants to be successful with in the future. Precise statements on how (with which measures) you want to achieve your goals (successes) should therefore also be included in a plan.
Practical tip: You should never plan only with “bare” figures. Every plan should be accompanied by documentation, which should include at least key words on how assumptions and plan values were arrived at. This makes it possible to reconstruct all figures in case of doubt and to prove them to third parties. At the same time, planning for the coming years can be improved because, for example, you no longer have to laboriously search for necessary contracts or providers of suitable studies.
All information and details in our articles and information have been compiled to the best of our knowledge. However, they are provided without liability. This information cannot replace individual advice in specific cases.
Link to the german version: https://thevisionworks.de/unternehmensplanung