SDI English Edition Newsletter: The Importance of a Business Plan

Why is it important to have a business plan? This question arises both for those who want to start a new business and for those who want to develop an existing one. The business plan allows you to establish the short and long-term goals of your business and the ways to achieve them. This prompts you to think critically and anticipate in advance.

For those who provide capital to your business, the business plan is a tool to evaluate the validity and profitability of your project. A well-done business plan can persuade banks and investors to support your plan.

The business plan contains economic forecasts, such as budget forecasts, cash flow analysis, and estimates of the necessary investments. This helps you to manage economic resources efficiently.

In drawing up the business plan, you will have to analyze the market, competitors, your strengths and weaknesses, identifying possible threats and opportunities.

A carefully written business plan effectively communicates the vision of the business to collaborators, partners, suppliers, and customers, orienting everyone towards the same goals.

A support for planning and organizing, planning human, technological, physical, and financial resources, effectively organizing the activity for the achievement of objectives.

The business plan provides a framework for monitoring the progress of the business, allowing you to compare actual performance with forecasts and intervene if necessary.

The business plan is an indispensable tool for leading your business to success, reducing risks, obtaining financing, and effectively managing the company.

Creating a business plan for an industrial transformation project requires an integrated approach that takes into account various technological, operational, economic, and human aspects.

Let's see in detail in the following table, called TAB1, the phases of preparation of the Business Plan, the components, the expected outputs, and of course the teams of people involved in the drafting of the same

This structure provides not only a clear idea of what should be included in each section of the business plan, but also which team is responsible for its development and implementation. This helps to ensure that all relevant parts of the organization are involved in the strategic planning process, facilitating communication and collaboration between different departments.

Graphical Representation

The best way to illustrate the plan, starting from the previous TAB1 table, is to generate a chart that includes the request for strategy, implementation times, and expected return, the readability of a chart (the following is certainly improvable) allows at a glance to identify its salient points.

The chart shows the five-year industrial strategic plan (in TAB1 table) with the timing and expected return (Blue Line) for each strategy identified in the previous table. Each bar represents the implementation duration of a specific strategy, and the red line indicates the cumulative expected return in percentage over time.

As can be seen, the expected return increases as the strategies are implemented, reflecting the accumulation of the benefits expected from the implementation of the strategic plan. This type of visualization helps to understand the temporal flow of the various activities and how these contribute to the achievement of the overall objectives of the organization over the five years.

There is no strategy without finance ...

Every plan is a set of projects, more or less impactful, that require budget and financial planning, this implies correct resource planning, first of all to respect the expected financial trend of the company and then to monitor any unexpected deviations.

In the updated chart, I have also included the financial budget required for the implementation of each strategy in the five-year plan (YELLOW line). This is represented by the dashed green line with squares, indicating the cumulative budget in thousands of euros required over time.

The chart now offers a three-dimensional view of the strategic plan, including not only the timing and expected return but also the financial budget necessary to realize each phase of the plan. This visualization helps to understand the flow of financial resources necessary in parallel with strategic development and expected value increases, facilitating more accurate financial planning and better resource allocation.

Execution Phase (Macro Level)

When the plan is approved, it will have to move on to its execution, sectioning it into programs, projects, phases that can advance in parallel (Agile) or in sequence (Waterfall); different approaches to be carefully evaluated before the start. They require careful planning to define the impact on the company and any points for improvement, another fundamental point is the measurement of results in the progress of the plan.

For example, to generate a macro project management plan based on the structure of the previously discussed business plan, we will integrate significant milestones and project checkpoints. This will help to monitor progress, ensure that teams are aligned, and facilitate communication between all levels of the organization.

Here's the macro project management plan in table form, incorporating milestones at key points:

Project Checkpoints

·         Weekly: Operational teams, ensuring constant monitoring of the progress of daily activities.

·         Bi-weekly: Team leaders, to discuss progress, obstacles and needs for additional resources.

·         Monthly: Project steering committee, to examine the overall status of the project and make strategic decisions.

·         Quarterly: Board meetings, to provide updates on overall progress, discuss high-level issues and assess progress against strategic objectives.

These checkpoints and milestones are designed to ensure the project stays on track and aligns with the strategic goals of the organization over the five-year plan. Inizio modulo

Cost Increase Management

Any self-respecting project, or programme, can incur cost increases and consequently generate deviations from the planned financial budget; therefore the above graph must be completed with the deviation indication in order to monitor spike risks.

In the updated graph, I have included both the planned and consolidated financial budget for each strategy in the five-year plan. The planned budget is represented by the YELLOW line , while the consolidated budget, which takes into account deviations from the planned budget, is represented by the RED line .

This approach makes it possible to visualise not only the initial expectations but also how these compare with the operational and financial reality, providing a clearer view of any overruns or savings compared to what was planned. The presence of this information in the graph helps to better understand the financial management of the strategic plan, highlighting areas where the plan went over budget or where resources could be saved.

Return analysis and deviation from initial plan

 In the updated chart, in addition to the financial discrepancy analysis, I have also included the return analysis with the discrepancies between the initial forecast and the consolidated at the end of the project. The cumulative expected return is represented by the BLUE line, while the actual cumulative consolidated return is displayed with the CYAN line. Discrepancies between expected and actual returns are noted in dark blue, indicating where and how actual performance deviated from expectations.

This addition provides a deeper understanding of how the project developed compared to expectations, highlighting areas of outperformance or underperformance. The detailed analysis of both financial budgets and returns helps assess the effectiveness of the strategies adopted and inform future strategic decisions.

What KPIs should be set to monitor the progress and results of the business plan?

To effectively monitor the progress and success of a five-year strategic business plan, it is essential to set specific Key Performance Indicators (KPIs) for each project area. Here are some KPIs to consider for the areas indicated:

Here are the KPIs to be monitored in tabular form, organised by monitoring area:

This table provides a clear and structured overview of crucial KPIs for monitoring and evaluating the different dimensions of a project, enabling managers to effectively track progress and identify areas for improvement.

Conclusions

Un business plan è importante per stabilire gli obiettivi a breve e lungo termine di un'impresa e le modalità per conseguirli. Ne contiene le previsioni A business plan is important for establishing the short- and long-term objectives of a company and how to achieve them. It contains economic forecasts, market analysis, business strategies, organisation and management, operating plan, financial plan, risk analysis and appendices. It provides a framework for monitoring the company's performance and allows actual performance to be compared with forecasts that need to be effectively monitored and measured; the progress and success of a strategic plan, it is essential to establish specific Key Performance Indicators (KPIs) for each area of the project.

The paper provides a high-level overview of how to create, implement and monitor an effective business plan. Drafting a coherent business plan may require significant effort, but it provides a starting point, monitor and effective project guide