Business Planning and the Budget Paper Example

Paper Type:  Essay
Pages:  7
Wordcount:  1881 Words
Date:  2022-06-20

To run a profitable business or any other enterprise, there are specific factors that one has to consider for smooth and efficient operation. A company may end up being a liability to the owner if it is run without a plan or a budget. For one it may end up requiring more starting capital than initially anticipated or the product may not be targeted to a specific market thereby registering little or no sales at all. Planning and budgeting are two crucial and essential requirements that contribute hugely to the tracking and evaluation of an enterprise's performance. (Stonich, 1977) Whenever an investor decides to undertake a particular investment venture, what they expect at the end upon its establishment and beginning of operation is returns. However, in some instances, this may not be achieved if the above two requirements are not observed. Running a business that adheres to the set plan and budget is a lot easier, and adjustments can be made where necessary if need be.

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Planning in the business setting may be referred to as making necessary arrangements, or preparations for the investment venture one intend to pursue. The step by step laying down of these arrangements allows the investor to identify the strengths and weaknesses in his proposed business plan and to implement or avoiding any non-profitable inclusions in the project. This way, they avoid incurring any losses or expenditure as the associated problems or risks are alleviated before any spending is done. A business plan may also get viewed as a manual that guides or instructs the business owner on how to best run his investment while avoiding significant risks that may be a threat to the flourishing of the business entity

On the other hand, a budget serves as a reinforcement to the plan by controlling spending through making necessary expenditure anticipations thereby enabling the investor to assess their financial capability to run the entity and also to avoid any unnecessary expenses. A budget is a fiscal part of any business since any business out there runs on monetary values of different kinds. With the aid of a budget plan, the business person can know their financial limits and also gauge the financial implications that starting and having the investment in operation will have on them thereby enabling them to make more informed decisions regarding the venture.

It, therefore, goes to show that with this two crucial business tools in hand, i.e., planning and budgeting, anyone can comfortably run a profitable business with relative ease.

Business Planning

The planning procedure is a strong administration effort that sorts out administration learning, activates the organization's assets, and spotlights those assets on accomplishing the organization's objectives. Planning is often done annually for already established businesses or at the beginning of a new business venture. The primary period of this yearly exertion is to some degree key in nature. It may be best done off-site since it expects directors to consider the business and to conceptualize thoughts. (Honig, 2004) A database of past data is useful because there is a lot of information that can get gathered, both positive and negative, from what has occurred previously. For new or running businesses, there are various areas that one may look into to ensure that the plan remains focused and on point. Some of these areas may include:

  • The target markets, i.e., who do we intend to sell our product to?
  • What competition are we up against?
  • How is the economic state fairing at the time?
  • Resources, i.e., availability, etc.

The above areas are of vital importance in the drawing up of a business plan. First, before starting any investment of whatever kind, we need to identify who our target market is. Failure to do so may only lead to the running of an entity with misplaced priorities thus running at a loss or failing to achieve the real potential. (Delmar, & Shane, 2003) The target market should be the majority members of the community in most cases. However, provided buyers in the market require a particular commodity, and the supply is low, this may also be a sensible area to venture into upon consideration of resources available and other factors.

Another vital business planning step is identifying the competition that one is up against. Consumers tend to get attached to various brands or commodity suppliers either due to their quality or presence in the market over a long duration of time thereby getting accustomed to the product. It would, therefore, be particularly difficult to convince this kind of consumers to buy a new product in the market that they are not used to. However, this doesn't mean that such sellers cannot be challenged. With a quality product and good marketing and product promotion planning in place such as advertising market penetration can be achieved.

While coming up with a business plan, it is also important to consider the economic state at the time concerning the commodity that one intends to sell. For instance, during an inflation period, it may not be an advisable idea to come into the market with a luxury product. This is because the buyers at such a time are usually more interested in essential commodities thus the luxury items may not sell well leading to low profits and sales which may be strenuous on the business. It is, therefore, necessary to study the current market trends while preparing a business plan.

Planning an investment is usually aimed at determining the strengths and hidden weaknesses that may be underlying. Luckily the S.W.O.T analysis may come in handy in such cases. (Houben, Lenie, & Vanhoof, 1999) S.W.O.T. is an acronym for strengths, weaknesses, opportunities, and threats, i.e., qualities, shortcomings, openings, and dangers. It is a type of administration self-examination to guarantee that the more significant part of the issues confronting the organization has been conveyed to the surface. The consequences of this self-examination ought to be an activity designed to recognize:

  • Strengths: The best open doors accessible to the organization. Is the organization committing sufficient assets to these openings? Are showcasing and operational endeavors synchronized? The organization must verify that its qualities are converted into upper hand and enhanced productivity.
  • Weaknesses: Issues that make the organization helpless against loss of a piece of the overall industry and diminished gainfulness.
  • Opportunities: Actions that the organization can take to enhance its execution and accomplish its objectives.
  • Threats: The inner and outer vulnerabilities that can harm the organization's future.

In a nutshell, the S.W.O.T action is a corporate self-examination of where you are as an organization, the place you need to go, and how you will arrive. Based on this examination, the activities undertaken demonstrate what steps ought to be taken at the time to achieve the coveted future ought to get realized. The planning does not alleviate probable risks. It endeavors to guarantee that the unforeseen dangers get anticipated for and correct resources allocation. Assets designation is a crucial segment of this exertion. Will the most critical undertakings be appropriately financed? Could emergencies be foreseen and unanticipated occasions managed?

Planning is necessary for some reasons. Given that the future is independent of the past, the past cannot be solely used to make informed future decisions. Constant changes in the markets also necessitate planning. Among other factors that may contribute o the need for business planning include:

  • Technological advancement is occurring at an unprecedented rate.
  • Regulatory matters require consistent consideration.
  • Populace changes, socioeconomics, and geographic movements require consistent alteration of promoting techniques.
  • The global rivalry is regular in relatively every industry.
  • Increase in the complexity of organizations and the workforce.


A budget refers to the management of the financial performance of a business entity. Through a budget plan, one can keep track of the financial expenses of an organization. New entrepreneurs may run their enterprises off the books and may not see the need to have a budget plan. Be that as it may, on the off chance that you are anticipating your business' future, you should finance your plans. (Neely, Bourne, & Adams, 2003). Planning is the best method to control your capital, enabling you to put resources into new open doors at the proper time. If your business is developing, you may not generally have the capacity to be hands-on with all aspects of it. You may need to part your financial plan up between various territories, for example, deals, creation, showcasing and so on. You'll see that cash begins to move in a wide range of headings through your association - spending plans are an important apparatus in guaranteeing that you remain responsible for consumption. Drawing up a budget plan could be taken as an arrangement to.

Control your funds, guarantee you can keep on funding your present duties empower you to settle on certain monetary choices and meet your goals and guarantee you have enough cash for your future ventures. It diagrams what you will spend your cash on and how that spending will get financed. Nonetheless, it's anything but an estimate. An estimate is a forecast without bounds through a financial plan is an arranged result without limits - characterized by your arrangement that your business needs to accomplish.

Making, observing and dealing with a financial plan is vital for a business to achieve its set goals. Budgeting should enable the business owner to distribute assets where they are required, with the intent that their business stays beneficial and productive. A budget requires not be convoluted. One needs to work out what they are probably going to achieve and spend in the budgeting time frame. When planning to draw design a budget plan, these inquiries would come in handy:

  • What are the anticipated deals for the spending time frame? Be practical - if you overestimate, it will cause you issues later on
  • What are the immediate expenses of offers, i.e., costs of materials, parts or subcontractors to make the item or supply the administration?
  • What are the settled expenses or overheads?

Answering the above questions enable the investor to assess their finances and the viability of the venture they intend to indulge in financially. The benefits of a budget plan include:

  • Deal with your cash viably.
  • Dispense fitting assets to experiments.
  • Screen execution.
  • Meet your targets or set goals.
  • Enhance central leadership.
  • Distinguish issues before they happen -, for example, the need to raise fund or income troubles.
  • Get ready for what's to come.
  • increment staff inspiration

Planning and budgeting are therefore two fiscal parts of any business venture and should, therefore, be taken with the seriousness they deserve for the success of any business endeavor. Irrespective of the size of the business, aspiring entrepreneurs should embrace these two business strategies for ultimate success and realization of set goals in the future.


Honig, B. (2004). Entrepreneurship education: Toward a model of contingency-based business planning. Academy of Management Learning & Education, 3(3), 258-273.

Delmar, F., & Shane, S. (2003). Does business planning facilitate the development of new ventures?. Strategic management journal, 24(12), 1165-1185.

Houben, G., Lenie, K., & Vanhoof, K. (1999). A knowledge-based SWOT-analysis system as an instrument for strategic planning in small and medium-sized enterprises. Decision support systems, 26(2), 125-135.

Stonich, P. J. (1977). Zero-base planning and budgeting. Dow Jones-Irwin.

Neely, A., Bourne, M.,...

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Business Planning and the Budget Paper Example. (2022, Jun 20). Retrieved from

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