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Why is business plan important?

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Importance of Planning in Business 

Achievement of objectives:

Objectives of the business can be achieved without any problem as planning provides guidelines for all activities of an enterprise. Good management is management by objectives (MBO).

It is through the planning function that the manager focuses his attention on the formulation of objectives.” (Peter F. Drucker). Objectives indicate the direction of growth.

Planning avoids haphazard actions:

Planning avoids aimless activities. Planning is necessary for avoiding hit or miss actions or random decisions. Without planning there will be confusion and chaos. Everyone in the enterprise is aware of what is to be done for achieving the goals of an enterprise.

Planning minimizes uncertainties:

Planning is concerned with the future which is uncertain and very difficult to predict. The risk and insecurity are minimized, Planning is essential to keep strict control on future events. An organisation operating with planning will always be better than that of an organisation operating without planning.

Planning brings economy in operations:

Planning leads to purposeful and orderly activities. The available resources are used to the best of their capacity. All activities are done in a minimum possible time. All types of wastages are eliminated in all the departments resulting in the efficient and economical operations of an enterprise. The cost of operation is minimized.

Planning provides basis for control:

Planning clearly specifies the standards/targets to be achieved. Planning and control are called as ‘Siamese Twins’ because control is possible only if planning has been done.

For example, if the worker is informed about the work to be accomplished in a day, the performance of the worker can be compared with the target laid down for him. The control function thus largely depends upon effective planning. In order to keep control over costs, the technique of budgetary control is applied.

Planning and technological development:

A business enterprise can survive in the market only if it uses the latest technology. Through planning, the possibilities of these technological developments are foreseen by the management so that old and obsolete machines can be replaced by the new machines.

For example, computers and computerised machines are replacing the old and obsolete machines very rapidly throughout the world.

Planning helps in proper utilisation of resources:

Through planning, the resources available within the organisation can be effectively used. It encourages the employees to come forward with difficulties being faced by them for the achievement of the targets.

Thus, workers frequently discuss their problems with the supervisors and a sense of involvement is felt by everyone in the organisation. It creates a team spirit. They also suggest better methods of work and ways and means to reduce the wastages.

 So all over planning is a very essential element of business.