Entrepreneurs, knowing that careful business planning can improve their chances for success, try to employ many of the corporate planning concepts and techniques used by large companies. The terminology itself can be confusing. Terms like strategies and action plans can be difficult to grasp for a businessperson involved in planning for the first time.
Action Plans Defined
Think of strategies as broad concepts of how you want to market your products or services, and action plans as the steps – often a sequence of steps in a defined order – required to implement the strategies. Every business owner makes action plans, even if he calls it something else such as a task list. A strategy of a restaurant might be to start marketing to an older demographic. The strategy was prompted by the owner noticing that many residents in the area fit this demographic and other restaurants are not catering to this group's needs. An action plan would be to identify local or online publications that serve this older demographic group and develop advertisements to reach them, announcing special pricing if they dine before a certain time or on a certain day of the week. Another action plan would be to research their food preferences to see if any adjustments to the restaurant's current menu need to be made in order to build customer loyalty within this group.
Assigns Responsibility
An aspect of generating action plans is determining who within the organization is responsible for the completion of each one. This is called assigning responsibility, and doing so better ensures all the tasks will be completed because someone is being held accountable. Defining a task as an assigned action plan implies it is important to complete. Managers know that if they complete the action plans assigned to them on time and to their supervisor's satisfaction they are eligible for bonuses, increased salary and promotions.
Break Big Goals Down into Smaller Tasks
Imagine the lengthy sequence necessary to develop a new health care technology from the idea stage and bring it to the hospital marketplace. This means means thinking a complex project all the way through, determining every task big and small that must be completed. The plans contain a list of resources needed to complete them. These could be personnel time, capital, outside resources such as consultants, or assets such as equipment and facilities. Action plans for a large project can be mapped out in the form of a timeline showing when these resources will be needed along the path to completing the overall goal.
More Accurate Financial Forecasting
The complete list of plans in the company's business plan shows everything that needs to be done to implement the company's strategies, shows when each task needs to be allocated necessary resources, and calculates the cost of these resources. Thorough planning enables the company to prepare forecasts that present a more accurate estimate of the total costs for the company to conduct business and reach its goals. When actual results become available and the management team compares them to the budgeted amounts, it is less likely there will be negative expense variances due to tasks that were omitted.