Failing to plan is planning to fail ― Alan Lakein
Opening Case Study:
Man with a Plan: Dr.Prathap C Reddy
M.D, MBBS and entrepreneur; Dr Prathap C Reddy is widely known as the founder of the first ever corporate chain of hospitals in India: The Apollo Hospitals Group. He is credited for modernizing the private hospitals in India. On completion of his medical degree from the Stanley Medical College in Chennai, he went to UK and USA to be trained as a Cardiologist. Later, he completed Fellowship from the Massachusetts General Hospital, Boston and attended the Missouri State Chest Hospital where he led many research programs till 1978, after which he returned India. He felt the lack of modern and world-class health care system and felt inspired to set up something big and finally in 1983 he established the Apollo Hospitals in Chennai. His finest establishment inspired renowned medical talent from across India and from hospitals in the US and UK. The venture he started with a 150-bedded Hospital in 1983, persistently excelled and became one of the largest hospital group across the country. He is credited for modernizing the private hospitals in India. In 1991, Prathap C Reddy was conferred with the Padma Bhushan and in 2010, with the second highest civilian award, the Padma Vibhushan for his important contribution in providing better health care system. He was also honored with ‘Life Time Achievement Award’ byHospimedica International, Mother St Teresa’s ‘Citizen of the Year Award’, the ‘Asia Pacific Bio Business Leadership Award’ by the University of Southern California, and Modern Medicare Excellence Award by the ICICI Group for his commendable accomplishments in the healthcare industry.
For majority of entrepreneurs, the term “business planning” may invoke up a feeling of fear. How is an entrepreneur supposed to know what is going to be the future of his venture even when he hasn’t even made a sale? How can he estimate future profits prior to investing in financial management software? Nevertheless, experienced entrepreneurs will approve the power of putting strategy to paper by chalking out a detailed plan in order to turn ideas into reality.
Planning for success
Business planning may be laborious, but missing out this step can leave an entrepreneur uninformed about his firm’s place in the market. The type of information drawn together during the planning process can help an entrepreneur to foresee latent risks and develop strategies for dealing with them before they occur. Many business owners return to their business plan even after their firm is up and running to help them refocus and chart a path for the future.
Additionally, a business plan is an instrument of communication. Banks and investors will consider an entrepreneur’s plan for evidence that his company can succeed. Prospective partners and employees will look at it as a blueprint for the future, bringing together disparate elements such as marketing, sales and operations into one document.
What type of plan?
The degree of detail incorporated in an entrepreneur’s business plan is majorly dependent on its intended audience. If the entrepreneur is a one-person start-up with limited capital needs, he may simply state and describe his business goals, the market conditions and a basic strategy for the future.
On the other hand, if the entrepreneur is seeking capital, in addition to the factors included above, he will make use of financial management software to prepare a workout. In order to lure investors, he needs to provide information on how he will give them a return on their money, as well as how he plans to grow using their funds. And a bank will likely be interested in factors such as risk assessment, profit and loss statements, and loan amounts.
Planning the plan
Before an entrepreneur starts writing a business plan, he needs to do some preparation. Here is a list of some of the main questions to focus on in the initial non-financial sections of his plan:
- What is the rationale behind the company? Creating a vision & mission statement will help an entrepreneur focus on why his business exists in the first place. A vision describes the aspirations of the entrepreneur behind setting up the business venture while the mission details how the vision will be accomplished by offering the product or service.
- Who are the potential customers? The entrepreneur’s marketing strategy will answer the question of who will buy his products or service. As much as possible, the entrepreneur should categorize his customers within separate market segments and analyze their particular behavior. What motivates them to buy? what they do? How much money do they want to spend? How do they respond to different types of marketing?
- Who are the competitors? The entrepreneur must gather as much information as he can about other companies in his domain to prepare a competitive analysis. These are the folks that he will be studying to see how his business can do what they do – better than they do it, of course! He must make sure that he lists both direct and indirect competitors, describe their strengths and weaknesses, and detail their pricing plans. The entrepreneur needs to think about how he will distinguish his product or service within this group.
- How will the business be run? In the section of description of operations, the entrepreneur must be prepared to set out exactly how he plans to manage his company on a day-to-day basis, as well as the physical necessities involved. Information included in this section relates to issues such as manufacturing, equipment, and business location. Who are his suppliers? How will he manage inventory? Will he employ staff?
What provides the money?
The final part of an entrepreneur’s business plan is where his financial management software can really come in handy. The financial section illustrates how much it will cost to run his company, as well as predicting when the business will become profitable.
are some factors to consider when planning this part of your business plan:
Start-up expenses: How much will it cost you to begin your business? Think about expenses such as rent, down payments on equipment, any licensing and registration fees, and initial inventory.
Operating expenses: Once you’re up and running, how much will you require on a regular basis to keep going each month? Consider costs such employee salaries, loan payments, materials purchase, storage fees, utilities and maintenance.
Cash flow: This section will help show you how much cash you will have access to on a regular basis – and determine whether you should seek additional financing. Included in a cash-flow projection for a given month are estimated sales figures, cash expenditures – and a reconciliation of the two figures.
Future profitability: By comparing how much money you expect to take in with how much you expect to pay out, you can come up with a prediction for when your business will break even and when it will become profitable.
Some entrepreneurs find the final section of a business plan frightening and seek out help from an expert who is skilled with financial management software and understands the needs of a small business. There are numerous resources available that can help an entrepreneur to write and hone his plan. The entrepreneur just needs to remember – don’t let uncertainty keep him away from completing this all-important step.
Importance of Planning
Now let’s understand why planning is important for every organization.
1. Improves efficiency: Planning makes best possible utilization of all available resources. It helps to decrease wastage of essential resources and avoids their duplication. It aims to give maximum returns at the minimum possible cost. Planning thus increases the overall efficiency.
2. Lowers business-related risks: There are numerous risks implicated in any modern business. Planning helps to anticipate these business-related risks. It also helps to take the needed precautions to keep away from these risks. Thus, planning reduces business risks.
3. Aids in proper coordination: Often, the plans of all departments of an organization are well coordinated with each other. Similarly, the short-term, medium-term and long-term plans of an organization are also coordinated with each other. Such proper coordination is possible only because of efficient planning.
4. Facilitates in organizing: Organizing means to bring together all available resources, i.e. 4Ms: Men, Material, Machine & Money. Organizing cannot be done with no planning. This is because planning tells us how much resources are required, when it is required, so on. This means that planning facilitates organizing.
5. Provides right direction: Direction implies giving proper information, accurate instructions and right guidance to the subordinates. Direction cannot be offered without planning. This is because planning tells us what to do, how to do it and when to do it. Therefore, planning helps to give right direction.
6. Maintains good control: In control, the actual performance of an employee is compared with the plans, and deviations (if any) are found out and corrected. It is impossible to achieve such a control without right planning. Therefore, planning becomes important to maintain a good control.
7. Helps to accomplish objectives: Every organization has certain goals or objectives or targets. It keeps working hard to fulfill these objectives. Planning helps an organization to achieve these objectives but with some ease and promptness. Planning also helps an organization to avoid doing some random (done by chance) activities.
8. Boosts the morale of personnel: A good plan offers various monetary and non-monetary incentives to both managers and employees. These incentives boost their morale and motivate them to work hard and achieve the objectives of the organization. Thus, planning through various incentives helps to motivate the personnel of an organization.
9. Promotes creativity and innovation: Planning gives confidence to managers to express and/or use their creativity and innovation. This brings satisfaction to the managers and success to the organization.
10. Aids in decision making: A manager makes many different plans. Then manager selects or chooses the best of all available plans. Doing a selection or choosing something means to take a decision. So, decision making is facilitated by planning.