Business planning takes place when the key stakeholders in a business sit down and flesh out all the goals, strategies, and actions that they envision taking to ensure the business’s survival, prosperity, and growth.

Here are some strategies for business planning and the ways it can benefit your business.

What Is Business Planning?

Business planning can play out in many different ways. Anytime upper management comes together to plan for the success of a business, it is a form of business planning. Business planning commonly involves collecting ideas in a formal business plan that outlines a summary of the business’s current state, as well as the state of the broader market, along with detailed steps the business will take to improve performance in the coming period.

Business plans aren’t just about money. The business plan outlines the general planning needed to start and run a successful business, and that includes profits, but it also goes beyond that. A plan should account for everything from scoping out the competition and figuring out how your new business will fit into the industry to assessing employee morale and planning for how to retain talent.

How Does Business Planning Work?

Every new business needs a business plan—a blueprint of how you will develop your new business, backed by research, that demonstrates how the business idea is viable. If your new business idea requires investment capital, you will have a better chance of obtaining debt or equity financing from financial institutions, angel investors, or venture capitalists if you have a solid business plan to back up your ideas.

Post-Startup Business Planning

The business plan isn’t a set-it-and-forget-it planning exercise. It should be a living document that is updated throughout the life cycle of your business.

Once the business has officially started, business planning will shift to setting and meeting goals and targets. Business planning is most effective when it’s done on a consistent schedule that revisits existing goals and projects throughout the year, perhaps even monthly. In addition to reviewing short-term goals throughout the year, it’s also important to establish a clear vision and lay the path for your long-term success.

Sales Forecasting

The sales forecast is a key section of the business plan that needs to be constantly tracked and updated. The sales forecast is an estimate of the sales of goods and services your business is likely to achieve over the forecasted period, along with the estimated profit from those sales. The forecast should take into account trends in your industry, the general economy, and the projected needs of your primary customers.

Cash Flow Analysis

Another crucial component of business planning is cash flow analysis. Avoiding extended cash flow shortages is vital for businesses, and many business failures can be blamed on cash flow problems.

Your business may have a large, lucrative order on the books, but if it can’t be invoiced until the job is completed, then you may run into cash flow problems. That scenario can get even worse if you have to hire staff, purchase inventory, and make other expenditures in the meantime to complete the project.

Performing regular cash flow projections is an important part of business planning. If managed properly, cash flow shortages can be covered by additional financing or equity investment.

Business Contingency Planning

In addition to business planning for profit and growth, your business should have a contingency plan. Contingency business planning (also known as business continuity planning or disaster planning) is the type of business planning that deals with crises and worst-case scenarios. A business contingency plan helps businesses deal with sudden emergencies, unexpected events, and new information that could disrupt your business.

The goals of a contingency plan are to:

• Provide for the safety and security of yourself, your employees, and your customers in the event of a fire, flood, robbery, data breach, illness, or some other disaster
• Ensure that your business can resume operations after an emergency as quickly as possible

Business Succession Planning

If your business is a family enterprise or you have specific plans for who you want to take over in the event of your retirement or illness, then you should have a plan in place to hand over control of the business. The issues of management, ownership, and taxes can cause a great deal of discord within families unless a succession plan is in place that clearly outlines the process.