Is Astrology and Business Planning Related?

[Southern Gal]

'We can't predict the future. Why then should we make bogus plans?'

This was what a client asked me. In his mind, business planning was not very different from astrology.

Actually, business plans are not forecasts. They are scenarios. They show, in specific detail, what is needed if you want a particular result, or show what would happen if take a particular decision.

You have a certain vision for your business. A business planning exercise would show you what resources would be needed, and what targets need to be achieved, if this vision is to translate into reality.

The discipline of working out the implications of your vision prevent it from being merely a grandiose dream. The details plannin exercise would give you an invaluable insight into the technical, administrative and marketing aspects of doing business on your intended scale.

With these insights, you would be a practical, and far more successful, business person. That, essentially, could be said to be the purpose of planning, not forecasting the future.

You start by translating your vision into a profit amount.

You work out the establishment costs that you have committed to, and would incur anyhow - whether you produce and sell a single product or not.

Next, you work out the margins over direct costs that you get at possible selling prices. You also estimate the number of units you can sell considering the extent of market and competition. A check is also made that you could produce that many units with your existing equipment and facilities. From these, you calculate the total margin that you could generate.

Would the margin cover the full establishment costs and give you the desired level of profit? If not, what is the bottleneck factor? Extent of demand? Level of competition? Production capacity constraints? Effectiveness of your marketing?

It is while answering these questions that you come to understand your business and its capacities.