Business plan as a decision making tool for projects

As a professional of the 21st century, would you be surprised to know that, traditionally, business plans were not included in the typical project to-do list? Regardless of this unfortunate antecedent, experts in the field of project management who have practiced and taught this discipline for many years strongly recommend including a business plan when setting the basis for a newly assigned project.
Business plan as a decision making tool for projects
A common belief is that a business plan is only a financial document to raise capital from financial institutions.

In reality, the business plan is your guideline to conduct any project. The ability to raise funds or convince management to pursue a project is only a consequence of a well constructed project.
Moreover, they think that it might be detrimental not to include it as it might hurt the business by leading to non-optimal and often, senseless constraints. This is especially the case in highly fractionated and budgeted organizations where people often loose the ‘big picture’ on what resources to assign to what project and with what goal, thus keeping constraints totally out of proportion. But before we go any further, let us clarify what we understand for ‘business plan’.

A business plan revolves around the strategic aspects of a project and is intended to allow the project manager and core team make intelligent and educated day-to-day decisions by helping organize and put in place a series of resources commensurate with the objective to be achieved. The business plan should not be confused with the ‘project business plan’, which in the project management field is often known as ‘project framework’.

By the time you have finished writing your Business Plan you will have a total understanding of your business; its strengths and weaknesses, the environment it operates in, what could potentially go wrong, and what you can do to ensure your success
The project business plan is a guideline to who governs the project and how that governance is conducted, what the deliverables are, and what the key milestones are. Nevertheless, it fails to take into consideration the strategic and commercial aspects of the project itself, as critical to the project’s success as the more ‘hard’ and operative technical aspects. After all, if a project doesn’t generate profit or a pre-determined range of return on investment, what’s the point of having it completed on time?

It is commonly accepted that when a person is responsible for a business plan, the deliverables may and probably will contain changes. The business plan is a decision-making tool that defines a strategy and promises a return on investment, not a set of financial figures. The financial figures are only the consequence of the strategic options or alternatives considered as part of the business plan. In this regard, there is not much difference between a project and a new venture since both are expected to deliver a return on investment. The project manager is the person in charge of turning the steering wheel in such way that the money he has been trusted with will produce the targeted results, all of this with a strategic vision in mind.

Writing a business plan enables you to consider all aspects of your project

Aligning the expected results with good resource management takes a lot of strategic planning and manoeuvring. That’s exactly what a business plans facilitate. We would like to advocate the incorporation of business plans to all new projects since the advantages of doing so are countless. Just to name a few, business plans are closer to the business realities, as they present the CEO with a clear vision of the project in line with his main interests, profitability and strategy; business plans also permit to compare the pros and cons of several options and choose the one that seems to be the more appropriate; business plans make it easier to make decisions and reach consensus, as people are more aware of the project’s critical aspects and profitability expectations; business plans bridge the gap between strategy and execution – many projects without business plans feature two heads with shared responsibilities, one being in charge of the technical aspects of the project while the other is in charge of the strategic and commercial aspects. Evidence shows that dissociating the execution from the reality is not a good thing as it only leads to inefficiency; business plans foster a forward-looking rather than a rear mirror look-at-all-the-money-spent-to-date vision; business plans make it possible to measure the consequences of changes asked by the client, and offer a revised price in tune with the new request; business plans allow easy consolidation and comparison of a portfolio; business plans increase team motivation, as people can see the results of their decisions; business plans may be used to evaluate the consequences of the project risks and decide, appropriately, what preventive actions to take; and finally, and perhaps the most important benefit derived from business plans is that they help identify the profitability levers of a project.

The above are only some of the benefits of having a business plan in any new project, but good project managers know that there are many others, and that it is always a good idea to have a business plan. Too often a project’s potential difficulties are underestimated upfront, and due to ‘diluted’ responsibilities, these difficulties are ignored from a business standpoint resulting in a 'budget variance’ that makes the project more costly or longer than originally conceived. By forcing the money-spenders as well as the money-askers to become a strategic-thinking team that focuses on securing project profitability, business plans have become an outstanding tool to balance various alternatives and choosing the one that better adapts to the company’s budget, objectives, and business realities. A minimal training is recommended to take full advantage of this methodology.

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