usiness planning and production of business plans tend to be a more reactive exercise for most businesses, e.g. when requested by a bank to support a loan application. However, all businesses should have a business plan of sorts in order to keep a grasp on the financial health of their business.
Most businesses that fail do so because the managers become so engrossed in the day-to-day operation of the business that they lose sight of their cash flow commitments and run out of working capital. In the absence of exceptional circumstances, some simple business planning can ensure that managers can see potential issues in advance and can take decisions in a proactive manner.
As well as keeping potential issues at bay, financial planning and investment appraisal processes will aid all strategic business decisions such as the purchase of a major asset, expansion/restructuring, HR activities, working capital management and shareholder changes.