Business Planning. Definition of goals and ways

Business Planning. Definition of goals and ways to achieve them

Business Planning is the development of a method for creating or doing something to achieve a goal. Business Planning is a future-oriented, regularly repeated process of information processing and decision-making based on systematic preparation carried out at the level of the system (enterprise) as a whole, and its individual elements (structural divisions, functional subsystems, individual employees). The result of planning is a plan or a system of plans.

The goal of planning

The goal of planning is to achieve the goals of the enterprise.

  • Planning tasks:
  • Consistency in achieving goals and actions of employees,
  • Departments of different levels of management;
  • Timely (early) identification and prevention of problems;
  • Coordination of private plans and their relationship with the strategy;
  • Preparation of decision making;
  • Determination of key indicators and control points;
  • Informing employees about goals, alternatives, deadlines, and restrictions;
  • The motivation of employees.

Planning and forecasting

The difference between planning and forecasting, and, accordingly, between a plan and a forecast, is that forecasting is a passive prediction (for example, forecasting inflation, the exchange rate, etc.), and planning is the formulation of intentions, which involves the conscious manifestation of volitional efforts and includes decision making. Planning establishes what needs to be done.

Strategic planning and long-term forecasting

The strategic value adds importance to the definition. Unlike long-term forecasting, strategic planning is the development of a set of measures and programs that should be implemented now (within a year) and is not synonymous.

About business management, strategic planning has the following features:

  • Directs to achieve a certain set of goals;
  • Examines alternative ways of doing the job and provides an estimate of the resources needed;
  • Provides a benchmark for measuring what has been done.

Planning methodology

A planning methodology is a set of principles, approaches, methods of organization, and planning methods for effectively solving problems. It is determined by understanding the ways, means, and opportunities to achieve the goals.

The planning object is the planning process in various socio-economic systems (corporations, enterprises, structural units).

The subject of planning is the activity itself and the relationship between planning objects and the external environment.

Approaches to organizing the planning process in hierarchical control systems:

Top-downbottom-up, and counter-planning (combinations of the first and second approaches).

Classification of planning types 

Classification of planning types based on characteristics :

The degree of compulsory implementation

According to the degree of compulsory implementation: directive (obligatory for execution) and indicative planning (recommending, guiding);

On the planning horizon:

Long-term (more than 3 years), medium-term (1-3 year plan), and short-term planning (up to 1 year);

By the degree of adaptation:

Rigid and flexible planning;

The orientation of planning ideas:

According to the orientation of planning ideas: reactive (for the past period), inactive (based on the prevailing trend), proactive (taking into account the increase), and interactive planning (from the desired future).

By the type of decisions:

Strategic (general), tactical (operational), and operational planning (calendar);

By object:

Corporate planning (for the enterprise as a whole), business planning (in the direction of the business, by projects), planning the activities of functional units (sales, marketing, finance), planning the activities of structural departments (workshops, sections), planning activities individual employees (jobs);

According to the degree of coverage of the object:

general (for the enterprise) and partial planning (for departments);

On the subject:

Production planning, marketing, sales, MTS, personnel, finance, R&D, and others;

By the degree of repeatability:

Systematic and one-time planning;

By the degree of detail:

Aggregated (general) and detailed planning;

By time basis:

Sequential (subsequent plan after the completion of the previous one), synchronous (planning for several consecutive periods at once), rolling (subsequent plan after the completion of a part of the previous plan), and extraordinary planning (as needed);

Approaches to organizing planning 

In practice, the following approaches are used  :

Top-down approach

Together with the management, the central planning service forms a strategic plan. Which is communicated to the subordinate heads of various departments. The strategies and objectives of each department are formed at the enterprise level as a whole and then serve as a guide to action for all managers and employees. The approach is typical for homogeneous (specialized, single-product) production.

A bottom-up approach

Production plans are formed directly in the departments, and the central planning service only consolidates these plans at the enterprise level. Leadership in the field has been delegated authority to create the strategy, and central services coordinate the interactions of various departments. The approach is typical for diversified enterprises.

Counter planning

 A combined approach, in which representatives of different levels of management agree on their goals and ideas on how to achieve them during repetitive planning meetings, which are the basis for the formation and approval of the plan. Planning begins with a centralized movement from top to bottom, specifies the goals necessary to achieve, and ends with a reverse decentralized direction of movement from the bottom up, providing ways to achieve the goal.

The Art of Strategic Dialogue

A new method that states that all managers are involved in the formulation of strategic plans for the development of the enterprise. Middle managers and planning service experts only assist in the development of dynamic plans. There are several equally possible development directions for enterprises.

Business planning. Definition 

A business plan is a plan, a program for the implementation of business operations, the actions of an enterprise, containing information about an enterprise, a product, its production, sales markets, marketing, organization of operations, and their effectiveness.

Business planning is the development of a business plan, a procedure for collecting, processing information, making a system of interrelated management decisions to obtain the expected result.

The Business planning and planning

Business planning has the following differences from planning:

  1. The business plan only includes one of the most important tasks of planning a new type of activity or business project, rather than the entire scope of corporate activities. The business plan only formulates new strategies or tactics for the development of the enterprise, and the plan may include various types of current and future joint activities.
  2. A business planning is mainly formulated for innovative projects and is subject to a clear implementation deadline, after which the work of this business project must be completed. The plan is continuous for all types of activities of the enterprise: as an annual plan is completed, the enterprise will continue to execute the next plan, and so on.
  3. The business plan basically includes opening a new business/project and obtaining the necessary resources (including funds) for it. Taking into account the current degree of risk, the business plan has increased the requirements for the most adequate basis for financial indicators. The plan is primarily needed for your own use, while external users need a business plan.
  4. Develop business plans under the guidance of senior management or business owners.

Planning and Business Planning Principles 

Planning should comply with the following principles :


Top-level goals should be basic.

Integrity and completeness.

 All planning objects must have common goals and be able to interact. The plans of the structural divisions make up a master plan.


The plan should be able to change due to planned reserves, built-in compensating mechanisms, the use of operational (changing), and alternative plans.


The information at the entrance and exit must be up-to-date.


The costs of planning should not be more than the benefits of planning, which depends on the quality of the decisions made.

Unity of coordination and integration.

The divisions’ plans should be unified and interdependent.


The planning process must be constant (a new plan appears after the completion of the previous one or after its partial completion).

Precision and detail. 

The degree of accuracy should be consistent with the purpose, and the level of detail in reporting should decrease with the level of the governing body to which the reporting increases.


 Employees should be actively involved in the development of this report.


 The company’s employees behave rationally.


The most optimal plans (maximum profit) are selected at each stage.

Communication of control levels.

It is achieved by top-down, bottom-up plans, a delegation of authority.

Ranking of planning objects.

 The most marginal projects are invested, and the equal ones with the largest sales volume.


 The plan should have alternative plans: optimistic, pessimistic, conservative, etc.

Social orientation.

The plan provides the necessary working conditions for employees, environmental, safe, and ergonomic work requirements.


 To keep costs down, the plan should have relatively stable performance.

Basic principles of business planning

  1. Organization. The business plan is adjusted, updated by the planners dynamically and continuously.
  2. Complicity. The company’s management is directly involved in the development of strategic development, making decisions, excluding alternative options.
  3. Training. Self-training of employees using business modeling, finding effective solutions.
  4. ConsistencyEach type of activity of the company is combined.
  5. Informational content. The use of software products and information systems to identify the optimal option from the sets.
  6. PerspectivePredicting the onset of future events in the complex.

Benefits of Business Planning 

The use of business planning provides important advantages for the enterprise :

  • Analysis of possible emergence of threats and emerging problems to prevent or reduce damage;
  • Rational distribution of limited resources and their concentration in key areas;
  • Improving the coordination of actions between departments/employees of the enterprise;
  • Providing an information base for the decision-making process and exchange of the necessary data;
  • An incentive for managers to implement their decisions in the course of their work;
  • Improving the professional training of managers and the development of their strategic thinking and foresight.

Application area

A business plan is provided to owners, senior management, credit institutions, investors, creditors, partners, and employees of the enterprise in the following cases :

  • When creating a new enterprise, during its reorganization, merger, takeover, change of owner;
  • With the technical re-equipment of production, the creation of a new product;
  • When attracting additional circulating and non-circulating capital;
  • Developing a new development strategy for the enterprise, approving it before a higher executive body (board of directors, owners);
  • When justifying the allocation of the necessary resources for the implementation of a project;
  • To calculate the effectiveness of a particular business idea ;
  • When entering new markets,

Business planning implementation problems

In practice, the following obstacles are encountered :

  • The limited working time.
  • Constant workload with current work.
  • High costs associated with the planning process.
  • lack of specialized knowledge, skills, and planning experience;
  • lack of trust in employees and consultants.

Reasons for not fulfilling the business planning

Reasons for deviation of actual from planned indicators according to M. Coveney :

  • Failure to provide support for the plan;
  • Inability to convey the essence of the strategy to other employees;
  • Disability to follow the plan;
  • Inability to adapt to changes.

Business Planning Methods 

In addition to planning methods, many organizations use their own methodology to demonstrate and evaluate the effectiveness of projects when formulating business plans, which reflects the details of their requirements. However, they all rely on the use of UNIDO’s methodology.

Among these methods, it is worth noting the methods of the World Bank, TACIS, EBRD (European Bank for Reconstruction and Development), KPMG, Deloitte & Touche, and Ernst & Young (auditing companies), as well as the methods of large-scale Russian finance. Institutions and credit organizations (Gazprombank, Sberbank, Ministry of Finance of the Russian Federation, etc.).

UNIDO methodology

The United Nations Industrial Development Organization UNIDO (UNIDO) developed in 1978 “Guidelines for the preparation of industrial feasibility studies”. The proposed concept and the UNIDO methodology developed on its basis have received wide recognition and have become an accepted worldwide standard.

The general structure of a business plan, by UNIDO standards, should have the following parameters :


  1. Idea (essence) of the proposed project

    • General terms and conditions.
    • Description of the sample of the new product.
    • Business experience assessment.
    • Market assessment.
    • Description of the consumers of the new product.
    • Assessment of competitors.
    • Assessment of your own strengths and weaknesses relative to competitors
  2. Marketing plan

    • Marketing goals.
    • Financial security of the marketing plan.
    • Marketing strategy.
  3. Production plan

    • The manufacturer of the new product.
    • Availability and required production capacity.
    • Material factors of production.
    • Description of the production process.
  4. Organizational plan

    • The organizational and legal form of ownership of the company.
    • The organizational structure of the company.
    • Distribution of duties.
    • Information about the partners.
    • Description of the external environment of the business.
    • Human resources of the firm.
    • Information about the members of the leading staff.
  5. Financial plan

    • Income and expense plan.
    • Cash receipts and payments plan.
    • The consolidated balance sheet of the firm’s assets and liabilities.
    • Break-even chart.
    • Funding strategy (sources of funds and their use).
    • Risk assessment and insurance.

Stages of developing a business plan

The business plan is developed in four stages :

Stage I: according to the development strategy direction, formulate the mission of the company/product;

Stage II. According to financial and non-financial goals, specify the specific targets of the company/project planned to be achieved;

Stage III. Choose goals to be achieved through the execution of development strategies;

Stage IV. Evaluate the company from the perspective of specific products and markets.

Investment project

UNIDO’s methodology is the methodological basis for the preparation and execution of feasibility studies of investment projects. Investment projects can be expressed in two forms: investment proposals (phase 1) and preparation of feasibility studies (phase 2).

To conduct a feasibility study (FS), it is necessary to collect the necessary information and conduct a study on the feasibility of implementing an industrial investment project to evaluate the effectiveness of the investment. Feasibility studies are conducted in the pre-investment stage of project development to prepare, and then investment decisions are made on project financing.

TACIS methodology

The method developed under the TACIS program (“technical assistance” program) for its partners is the most extensive  :

  1. Summary
  2. Enterprise goals
  3. Activities of an existing enterprise
  4. Control
  5. Market
  6. Products
  7. Pricing
  8. Suppliers
  9. Material resources
  10. Premises
  11. Staff
  12. Profit and forecasts
  13. The need for finance.

EBRD methodology 

The method of the European Bank for Reconstruction and Development was developed by a simplified version for its partners :

  1. Title page
  2. Confidentiality memorandum
  3. Summary
  4. Company
    • The history of the development of the enterprise and its state at the time of creating the business plan, a description of the current activities
    • Owners, management personnel, employees of the enterprise
    • Current activity
    • Financial condition
    • Loans
  5. Project
    • General information about the project
    • Investment plan of the project
    • Market analysis, competitiveness
    • Description of the production process
    • Financial plan
    • Environmental Assessment
  6. Financing
    • Loan receipt and repayment schedules
    • Pledge and surety
    • Equipment and works to be financed from credit funds
    • SWOT analysis
    • Risks and measures to reduce them
  7. Applications

KPMG Methodology has the structure of the business planning

The KPMG methodology has the structure of a business plan:

  1. Summary
    • Short review
    • Products and services offered
    • Mission, goals, and objectives
  2. Products and services
    • Introduction
    • Products and services
    • Related products and services
  3. Market and industry analysis
    • Product and service use
    • Demographic analysis
    • Competition
    • SWOT analysis
  4. Target Markets
    • Target consumers
    • Geographic target market
    • Pricing
  5. Advertising and promotion strategies
    • Promotion strategy
    • Advertising distribution media
    • Sales forecast
  6. Control
    • Organization and key personnel
    • Constant consumption of assets
    • Production preparation costs
  7. The financial analysis
    • Cost of products sold
    • Break-even analysis
    • Quantitative analysis
    • Income and loss
    • Flow of funds
    • Enterprise balance sheets
    • Risks
  8. Applications

Ernst & Young methodology has the structure of a business planning

The structure of a business plan within the Ernst & Young standards can be as follows :

  1. Executive summary
  2. Market analysis
  3. Company description
  4. Products and services
  5. Marketing and sales
  6. Production
  7. Management and ownership
  8. Required funds and their use
  9. Financial data
  10. Applications or add-ons.

After formulating a business plan based on Ernst & Young’s standards, it is recommended to develop a plan to retain key project employees and consider their risk of leaving the project.

In addition, it is necessary to analyze the actual needs of project financing. In fact, due to underestimation of capital investment needs or underestimation of project scale, the implementation of almost every project requires additional funds.

The project must have a mechanism (possibly) for investors to withdraw from the project and replace it.