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What should be the nature of the relationship between the business plan and the IS plan? (at least 2000 words)
BUSINESS PLAN
Business plan is defined as a formal or informal document that serves as a road map for a business. A formal business plan is a detailed document that usually follows a standard format. Formal business plans are a necessity for securing outside funding for a business, including SBA loans and private capital. Formal business plans include an appendix area that contains important supporting documents. In opposition, informal business plan can consist of almost anything. In this case, the definition of a business plan is purely in the eyes of the business owner. Informal business plans may be nothing more than ideas scribbled down on paper. However, the more detailed and accurate the business plan the more useful it is as a guide to conducting business. Informal business plans are not presented to others for they are merely a planning tool for the business owner.
The general notion and old saying of "Those who fail to plan, plan to fail" can hold great meaning for someone who wants to start or operate a business. Even if outside funding is not necessary, it might become necessary as the business grows and if it does not, the business plan would become valuable tool that can help a business owner understand the market and competition, keys to avoiding business failure. That's why understanding the definition of a business plan is so important.
When properly developed and maintained, a business plan can help to keep focused. In that sense, the answer to the question, "What is a Business Plan?" or "What is the definition of a business plan?" is simply that a business plan is a road map for a business: What it does, who's involved, who is included in its market and why the business should be successful against the competition.
By definition, a business plan usually applies to a formal business plan used for securing financing, while in actual practice, business plans may be very informal documents that small business owners use when making decisions about their business and its operations.
A company's business plan is one of its most important documents. It can be used by managers and executives for internal planning. It can be used as the basis for loan applications from banks and other lenders. It can be used to persuade investors that a company is a good investment. For start-up ventures, the process of preparing a business plan serves as a road map to the future by making entrepreneurs and business owners think through their strategies, evaluate their basic business concepts, recognize their business's limitations, and avoid a variety of mistakes.
Virtually every business needs a business plan. Lack of proper planning is one of the most often cited reasons for business failures. Business plans help companies identify their goals and objectives and provide them with tactics and strategies to reach those goals. They are not historical documents; rather, they embody a set of management decisions about necessary steps for the business to reach its objectives and perform in accordance with its capabilities.
"By its very definition, a business plan is a plan for the business, clarifying why it exists, who it exists for, what products and services it provides these client groups, how it intends to develop and deliver these products and services, and where it is headed," Rebecca Jones wrote in Information Outlook. "A business plan is a roadmap for the organization, showing the destination it seeks, the path it will follow to get there, and the supplies and wherewithal required to complete the journey."
Business plans have several major uses. These include internal planning and forecasting, obtaining funding for ongoing operations or expansion, planned divestiture and spin-offs, and restructuring or reorganizing. While business plans have elements common to all uses, most business plans are tailored according to their specific use and intended audience.
When used for internal planning, business plans can provide a blueprint for the operation of an entire company. A company's performance and progress can be measured against planned goals involving sales, expenditures, time frame, and strategic direction. Business plans also help an entrepreneur or business manager identify and focus on potential problem areas, both inside and outside the company. Once potentially troublesome areas have been identified, proposed solutions and contingency plans can be incorporated into the business plan.
Business plans also cover such areas as marketing opportunities and future financing requirements that require management attention. In some instances—such as scenarios in which an entrepreneur decides to turn a favorite hobby into a home-based business enterprise—the business plan can be a simple document of one or two pages. A business proposal of significant complexity and financial importance, however, should include a far more comprehensive plan. A tool and die manufacturer looking for investors to expand production capacity, for example, will in all likelihood need to compose a business plan of greater depth and detail than will a computer enthusiast who decides to launch a desktop publishing business out of his/her home.
Ideally, everyone in the company will use the information contained in the company's business plan, whether to set performance targets, guide decision-making with regard to ongoing operations, or assess personnel performance in terms of the their ability to meet objectives set forth in the business plan. In addition, workers who are informed about the business plan can evaluate and adjust their own performance in terms of company objectives and expectations.
Business plans can also be used in the restructuring or reorganization of a business. In such cases, business plans describe actions that need to be taken in order to restore profitability or reach other goals. Necessary operational changes are identified in the plan, along with corresponding reductions in expenses. Desired performance and operational objectives are delineated, often with corresponding changes in production equipment, work force, and certain products and/or services.
Banks and other lenders use business plans to evaluate a company's ability to handle more debt and, in some cases, equity financing. The business plan documents the company's cash flow requirements and provides a detailed description of its assets, capitalization, and projected financial performance. It provides potential lenders and investors with verifiable facts about a company's performance so that risks can be accurately identified and evaluated.
Finally, the business plan is the primary source of information for potential purchasers of a company or one of its divisions or product lines. As with outside lenders and investors, business plans prepared for potential buyers provide them with verifiable facts and projections about the company's performance. The business plan must communicate the basic business premise or concept of the company, present its strengths as well as weaknesses, and provide indications of the company's long-term viability. When a company is attempting to sell off a division or product line, the business plan defines the new business entity.
The process of preparing and developing a business plan is an interactive one that involves every functional area of a company. Successful business plans are usually the result of team effort, in which all employees provide input based on their special areas of expertise and technical skill. Business owners and managers provide overall support for the planning process as well as general guidelines and feedback on the plan as it is being developed.
Some companies make the planning process an ongoing one. In other cases, such as for a business acquisition, it may be necessary to prepare a business plan on short notice. The process can be expedited by determining what information is needed from each area of a company. Participants can then meet to complete only those plan components that are needed immediately. During the planning process, it is usually desirable to encourage teamwork, especially across functional lines. When people work together to collect and analyze data, they are far more likely to be able to arrive at objectives that are consistent with one another.
A few basic steps can be identified in the planning process. The first step is to organize the process by identifying who will be involved, determining the basic scope of the plan, and establishing a time frame within which the plan is to be completed. Company leaders not only communicate their support for the planning process, they also define the responsibilities of each party involved. Work plans that supplement the general timetable are helpful in meeting deadlines associated with the planning process.
Once the planning process has been fully organized, participants can begin the process of assessment. Internal evaluations include identification of strengths and weaknesses of all areas of the business. In addition, it is generally useful to assess and evaluate such external factors as the general economy, competition, relevant technologies, trends, and other circumstances outside the control of the company that can affect its performance or fundamental health.
Setting goals and defining strategies are the next key steps in the planning process. Using the assessment and evaluation of internal and external factors, fundamental goals for the business are developed. Pertinent areas to be studied include the company's competitive philosophy, its market focus, and its customer service philosophy. Specific performance and operational strategies are then established, based on these goals.
After strategies and goals have been defined, they are translated into specific plans and programs. These plans and programs determine how a company's resources will be managed in order to implement its strategies and achieve its goals. Specific areas that require their own plans and programs include the overall organization of the company, sales and marketing, products and production, and finance. Finally, these specific plans are assembled into the completed business plan.
Business plans must include authoritative, factual data, usually obtained from a wide range of sources. The plans must be written in a consistent and realistic manner. Contradictions or inconsistencies within a business plan create doubts in the minds of its readers. Problems and risks associated with the business should be described rather than avoided, then used as the basis for presenting thoughtful solutions and contingency plans. Business plans can be tailored to the needs and interests of specific audiences by emphasizing or presenting differently certain categories of information in different versions of the plan.
Business plans contain a number of specific elements as well as certain general characteristics. These include a general description of the company and its products or services, an executive summary, management and organizational charts, sales and marketing plans, financial plans, and production plans. They describe the general direction of a company in terms of its underlying philosophy, goals, and objectives. Business plans explain specific steps and actions that will be taken as well as their rationale. That is, they not only tell how a company will achieve its strategic objectives, they also tell why specific decisions have been made. Anticipated problems and the company's response to them are usually included. In effect, business plans are a set of management decisions about how the company will proceed along a specified course of action, with justifications for those decisions.
IS PLAN
Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That's why a business review or preparation of a strategic plan is a virtual necessity. This may not be a recipe for success, but without it a business is much more likely to fail.
A sound plan should:
• Serve as a framework for decisions or for securing support/approval.
• Provide a basis for more detailed planning.
• Explain the business to others in order to inform, motivate & involve.
• Assist benchmarking & performance monitoring.
• Stimulate change and become building block for next plan.
A strategic plan should not be confused with a business plan. The former is likely to be a (very) short document whereas a business plan is usually a much more substantial and detailed document. A strategic plan can provide the foundation and frame work for a business plan. A strategic plan is not the same thing as an operational plan. The former should be visionary, conceptual and directional in contrast to an operational plan which is likely to be shorter term, tactical, focused, implementable and measurable. As an example, compare the process of planning a vacation (where, when, duration, budget, who goes, how travel are all strategic issues) with the final preparations (tasks, deadlines, funding, weather, packing, transport and so on are all operational matters). A satisfactory strategic plan must be realistic and attainable so as to allow managers and entrepreneurs to think strategically and act operationally.
The preparation of a strategic plan is a multi-step process covering vision, mission, objectives, values, strategies, goals and programs.
The first step is to develop a realistic Vision for the business. This should be presented as a pen picture of the business in three or more years time in terms of its likely physical appearance, size, activities etc. Answer the question: "if someone from Mars visited the business, what would they see (or sense)?" Consider its future products, markets, customers, processes, location, staffing etc.
The nature of a business is often expressed in terms of its Mission which indicates the purpose and activities of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". A statement along these lines indicates what the business is about and is infinitely clearer than saying, for instance, "we're in electronics" or worse still, "we are in business to make money" (assuming that the business is not a mint !). Also, some people confuse mission statements with value statements (see below) - the former should be very hard-nosed while the latter can deal with 'softer' issues surrounding the business. When drafting a mission statement, critically examine every noun, adjective and verb to ensure that they are focused, realistic and justified.
The next element is to address the Values governing the operation of the business and its conduct or relationships with society at large, customers, suppliers, employees, local community and other stakeholders.
The third key element is to explicitly state the business's Objectives in terms of the results it needs/wants to achieve in the medium/long term. Aside from presumably indicating a necessity to achieve regular profits (expressed as return on shareholders' funds), objectives should relate to the expectations and requirements of all the major stakeholders, including employees, and should reflect the underlying reasons for running the business. These objectives could cover growth, profitability, technology, offerings and markets.
Next are the Strategies - the rules and guidelines by which the mission, objectives etc. may be achieved. They can cover the business as a whole including such matters as diversification, organic growth, or acquisition plans, or they can relate to primary matters in key functional areas. Use SWOTs to help identify possible strategies by building on strengths, resolving weaknesses, exploiting opportunities and avoiding threats.
Next come the Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company's objectives, for example, to achieve sales of $3m in three years time. Goals should be quantifiable, consistent, realistic and achievable. They can relate to factors like market (sizes and shares), products, finances, profitability, utilization, efficiency.
The final elements are the Programs which set out the implementation plans for the key strategies. These should cover resources, objectives, time-scales, deadlines, budgets and performance targets.
It goes without saying that the mission, objectives, values, strategies and goals must be inter-linked and consistent with each other. This is much easier said than done because many businesses which are set up with the clear objective of making their owners wealthy often lack strategies, realistic goals or concise missions.
http://homebusiness.about.com/od/homebusinessglossar1/g/what-is-bizplan.htm
http://www.answers.com/topic/business-plan
http://www.planware.org/strategicplan.htm
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