Planning is the process a small-business owner and his team use to set a course for the business in the upcoming year and beyond. Companies set goals and determine a course of action to reach these goals. A planning process greatly enhances the chance of reaching those goals. Along the way, planning improves the efficiency of the management team.
A well thought out plan based on in-depth research of the market, an understanding of customer needs and an awareness of threats posed by competitors is more likely to succeed than one based on guesswork. Planning allows the management team to use both financial and human resources more efficiently. Time and money will not be wasted on strategies that later have to be scrapped because they were not successful. Implementing the wrong strategies slows down the company's sales momentum.
Planning helps a business owner and her team establish priorities and place an emphasis on the projects or tasks that will contribute the most to the company's growth and profitability. A small business owner can choose from among many different strategic alternatives, including which media to use for an advertising campaign, which distribution channels to utilize and which products or services to offer. Planning brings a logical approach to this process of prioritization. The business owner can compare the costs and potential benefits of each strategic alternative.
In the planning process, the company determines strategies and then maps out the tasks or action plans necessary to implement them. The action plans specify the person responsible for completing each task and the due date for completion. Implementation may require the cooperation of staff members across departments. Planning enables the management team to ensure that each staff member understands what she is responsible for and how her task fits into the larger picture of implementing a strategy. Without this accountability, key tasks assigned to one department may not be completed on time, putting the other departments behind schedule.
Planning involves establishing a system of monitoring changes in the business environment. Competitive threats then can be recognized as they emerge, when there is the best opportunity to deal with them through changes in the company's own strategies and tactics. An efficient management team is one that stays ahead of competitors rather than having to catch up. Delays in addressing threats raise the chances that damage will be done and sales lost to a competitor. The most efficient way of dealing with threats is to anticipate them and have plans in place -- referred to as contingency plans -- to counter the threats before the company is severely impacted.
One of the steps in the planning process is to identify areas where the company could perform more efficiently. Even the most successful small companies have room to implement processes, procedures and technologies that bring about gains in productivity. These gains can be measured in numerical terms such as increased gross margin percentage. They may also be more qualitative such as improved employee satisfaction, because they are given the tools and management guidance to accomplish their jobs more efficiently. Planning creates a culture of never being satisfied with current performance and always seeking ways to improve.