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Explain the importance of business planning to the survival and growth of organisations

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Introduction

Explain the importance of business planning to the survival and growth of organisations. A business plan should always for a business start up, the use of the business plan should not stop there, and businesses should be planning constantly in order to run their business effectively and efficiently. Businesses have to think about how they are going to plan for survival or growth, therefore they need to do business planning, to help the business survive and to grow. Business planning means the stages the business would need to build up the business. Business planning is a written document which is used by various many types of people such as financial advisors such as banks, etc, it shows that the business has taken the time and discipline to think about where the business is and where the business wants to go. This is called a Business Plan. Business planning is essentially about taking a more in depth approach to thinking strategically about the future of the business whilst taking the businesses present situation into account, when planning Businesses think about two basic goals, it would be the description of the over view of the business idea and provide financial data, to show that the business is making good money for future developments, this record can be used in future to show financial institutions for example: if the business needs money for a new project in order to grow the business and goes to a bank for some ...read more.

Middle

* A cash flow projection: Even if your profit-and-loss forecast tells you that your business will have higher revenues than expenses, in other words, that it will be profitable - those numbers won't tell you if you'll have enough cash on hand from month to month to pay your rent or buy more inventory. A cash-flow projection shows how much money you'll have -- or how much you'll be short -- each month. This lets you know if you'll need a credit line or other arrangement to cover periodic shortfalls. For example when the business wants to grow and survive they will first look at there financial calculations to see where the business is in terms of finance and then they will decide and then make other calculations to see how much money will be needed for the new project or it could help them to develop better services if finances were not enough, and then this will help them eventually grow. By using calculations it will help the business in summery to see whether the business is to grow or survive and most importantly if the business will be profitable to invest in the business. In summery business planning helps significantly and contributes massively to help the business to survive and grow as it helps the business to: * Focus businesses attention on longer-term business goals and direction * Identify any areas on internal strengths and weaknesses * Identify possible threats and constraints on the business ...read more.

Conclusion

It will essentially help to see whither the company has break even. The two financial forecasts that need to be prepared, the profit and loss and cash flow forecasts, These 2 documents help the business significantly and help the business to make decisions in order to grow and to survive. If the business needs to borrow money, and as a result will have a debt to service, the Profit and Loss forecast will show whether the business can afford to do this. If, as with the majority of start-ups, the business will run at a loss for a period of time, the P&L forecast will also indicate how long this is likely to be (based upon achieving the stated sales expectations) and at what point in its development the business will breakeven. Having drawn this up, if a P&L forecast shows that the new business is not likely to breakeven until month 20, Then at least the business will be in informed of there position and will judge the risk of committing the business life's savings to the venture. Having prepared a business plan, which includes customer and market research, a sales forecast, a promotional strategy, a breakeven analysis and budgets and financial forecasts, there should then be indications as to how viable the business will be, and the likely returns on any investment made. ?? ?? ?? ?? BTEC National Diploma In Business Studies Unit 1: Introduction To Business Page Number:2 ...read more.

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