Business planning is one of the basic functions performed by an entrepreneurs. In the present era of global competition, there is no place for guesswork. There is a need for proper planning. Business planning assists in determining the future course of action to be followed by entrepreneur to work properly and smoothly. It is a decision in advance and a process of thinking before doing. It answers the various questions like what to do ?, when to do ? how to do ? etc. It is concerned with the mental state of the entrepreneur. It is an intellectual process.
Business Planning – Definition, Nature, Advantages, Limitations
DEFINITIONS of Business Planning
“Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results”. – George Terry
“Planning is the thinking process, the organized foresight, the vision based on facts and experience that is required for intelligent action”. -Alford and Beatty
“Planning is deciding in advance what is to be done. When a entrepreneur plans, he projects a course of action for the future, attempting to achieve a consistent, co-ordinated structure of operations aimed at the desired results”. –Theo Haimann
Nature or Characteristics of Business Planning
2. It focuss on Objectives. Planning assist in framing the aims and objectives of enterprise to be achieved by entrepreneur. Different means to achieve the objectives are also decided by the planning.
3. Function of All Types of the Entrepreneurs. Every entrepreneurs whether large or small, men or women, urban or rural plan their entrepreneurial activities.
4. Intellectual Process. Planning is an intellectual activity. The success of planning depends upon the skill, vision, creativeness and Imagination of entrepreneur. It is a thinking process based on the mental ability of an entrepreneur.
5. Continuous Process. Planning is a regular and permanent process in an enterprise. It has no end. An entrepreneurs has to plan its activities continuously in the light of changing demands of entrepreneurial environment of a country.
6. Planning is Flexible. Planning is a flexible process. It is a ever-changing activity in accordance with the change in government policies, technologies, customers’ demands, methods of production etc. Entrepreneur modifies the existing plans according to the demand of hours.
7. Planning Secures Efficiency. Planning assists the entrepreneurs to performs entrepreneurial activities effectively and efficiently. Planning plays vital role in eliminating various types of wastages like wastages of money, men and material to secure efficiency, economy and accuracy in entrepreneurial activities.
8. Planning Involves Forécasting. Planning depends upon correct business forecasting. The production of future activities of an enterprise depends upon scientific techniques of forecasting.
9. Planning has Limitations. Planning is also influenced by certain limitation on account of men, money, machines and material.
10. Planning is Realistic. Planning should be in realistic in nature.The results of a plan should be attainable.
Advantages of Business Planning
1. Achievement of Goals. Business planning assist in successful achievements of entrepreneurial goals. Business planning provides a guideline to entrepreneur to attain to objectives without any problem.
2. Planning Minimise Uncertainties. Business planning plays a significant role in minimising the uncertainty in the functions of enterprise. Entrepreneur take calculated risk with the help of business planning. The chances of risks and losses can be reduced by adopting strategic planning.
3. Economy in Operations. Planning ensures various economies in entrepreneurial operations by eliminating different types of wastages. The cost of operations is reduced through best use of limited resources of enterprise.
4. Planning eliminates Haphazard Actions. Business planning eliminates useless activities of enterprise. Planning replaces the guesswork and hit or miss actions.
5. Planning provides basis of Control. Planning and control functions of an entrepreneur are interdependent on each other. Planning is the starting point whereas controlling is the ending point. These are two sides of a single coin. The control function depend upon planning.
6. Proper use of Resources. Planning assists the entrepreneur to properly use the limited and scarce resources like men, money, machine, material and method.
7. Technological Improvement. Business planning helps the entrepreneur to adopt new and latest technology for the better of enterprise. Technological improvements directly contribute to improve the quality and quantity of products and services of entrepreneur.
Limitations of Business Planning
1. Costly. Planning is a costly affair. Small scale entrepreneurs are not in a position to plan its activities due to shortage of funds.
2. Time Consuming Process. Planning is a time consuming process. It needs much time which results in delayed decisions. In case of quick decision, the long process of planning is not possible to follow due to shortage of time.
3. It reduces Initiative of Employees. Planning reduces initiative of employees as they have to strictly work according to the instructions given in planning.
4. Resistanee to Change. The workers resist the change as they become habitual to work in a set method of doing work. It results in the failure of new plans.
5. Inaccuracy. Planning is based on information and data which may not be accurate. Similarly, planning is relating to future and future is always uncertain. Hence, it is impossible to predict the future accurately.
6. Planning is influenced by External Factors. Business planning is directly influenced by various external factors such as polítical, social, economical, technological and demographic etc. Government policies like trade policy, tax policy, import policy etc. may adversely effect the business plan of a concern.