Effective strategic and business planning

Effective strategic and business planning

Strategic planning is a coordinated and systematic process for developing a plan for the overall direction of the organization and the allocation of resources to optimize future potential. Many businesses start with just an idea and a desire to succeed. Sometimes it works; more often than not it doesn’t. According to the US Small Business Administration (SBA), the main reasons businesses fail are lack of a solid plan and lack of adequate capital. These two reasons are not unrelated, especially in tough economic times. After all, if you don’t invest in a good plan for your business, why would you expect anyone else to invest in your business?

Strategic and business planning isn’t just a box to check on your to-do list. Strategic planning is the foundation for everything: your business identity, your marketing and sales, your operations, your management approach and your financing. However, there are many excuses for not doing so. Even well-established businesses need to differentiate themselves from their competitors in order to grow and improve their margins.

Regardless of the size of your business or how long you’ve been in business, if you’re willing to invest, you could be someone who could leapfrog your competition and change the nature of our economy through new processes, products or services.

Planning is much more than just a team-building exercise, but one of the benefits of using the inclusive planning process described below is building a strong, cohesive management team. The feedback from my strategic planning workshop is that the process brings out the different management perspectives and structures them into a unified strategy.

My six-step process for building an actionable strategic plan is the basis of my strategic planning workshop.

Orient the participants – Build a common understanding of the planning process and frameworks that provide insight into your business. This step defines the general framework for the process and explores alternatives for more fully developing various aspects of the process. Planning team members should come from the company’s functional units (finance, marketing, operations), so they can have different perspectives based on their area of ‚Äč‚Äčexpertise. The owners end game is a major driver of the strategy.

Review your current mission, objectives/tasks – Establish the starting point and explore alternatives that can add value to your current plan. Whether your current goals and objectives are loosely defined or well defined, they define your business and how it is run. If you are not sure where you are, it will be difficult to determine your direction. I use a customer-focused three-question exercise to define your current business and then look at the next 12 months.

When you define your business from the customer’s perspective, it can make all the difference to your success. Growth comes from focusing on customers and consistently delivering value to them. Although strategic plans typically cover longer time periods, a solid plan for the next year is important to have any confidence in a three- to five-year plan.

Prepare your situational analysis – Identify market segments, competitors, capabilities, core competencies and opportunities. Instead of trying to tackle large, vast markets, define your niche and preferably define it as your competitive advantage. To position yourself against your competitors, understand who they are and what their market strategy is.

When considering your options, you should conduct an honest Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. All of your core competencies should be strengths, but do they each add value? Are they unique and sustainable? How important is each competency to your customers? Finally, identify and evaluate your perceived opportunities. Preparing a situational analysis can be an intensive activity, especially if you find that you are not well aligned with your clients. If you’re not well-aligned, you’re left with the choice of finding new customers, developing new products or services that meet customer needs, or becoming a statistic. Over the past two years, we’ve seen some major examples of companies not responding to changing customer needs and wants or changing government regulations.

Formulate your strategy – Brain attack; industrial scenario development; full strategic assessments; formulation of strategies, mission, goals and objectives. “First comes thought; then the organization of that thought into ideas and plans; then the transformation of those plans into reality.” – Napoleon Hill, author of Think and Grow Rich.

This is where you stand out and find ways to beat the competition. Some companies fared poorly in the down economy, but others grew and thrived because they had a strategy that responded to the change. Small businesses have an advantage over their larger rivals because they can move faster to respond to change and implement new ideas. This step definitely requires thought, but the rewards can be significant. Remember that many of today’s great businesses were founded during a recession. Other small businesses have proven their worth and have been acquired by larger businesses.

Prepare your implementation plan – Define action plans, schedules and budgets. Action without strategy is wrong. Strategy without action is wasted. What specifically do you need to do to achieve your goals and objectives? Who should do it and what other resources will they need? When should it be done? Actions should be broken down into measurable steps according to a schedule and assigned to specific people. How will you fund your plan? Your execution plan is your primary reality check. If the schedule is unrealistic or if you do not have the necessary people, resources or funding; what adjustments can you make to reach your goals?

Prepare to be watched – Establish metrics and monitoring schedule. Once you identify what needs to be done, you need to determine how you will measure progress toward your goals and objectives and how often to do so. Monitoring should be frequent enough to allow corrective action to be taken before critical dates are missed. Monthly progress reviews and quarterly strategy reviews may or may not be sufficient. Setting minimal, targeted and simple goals can also be helpful. Remember that the plan is not set in stone. If your reviews show that something is not working – replace it.

In general, I recommend using the SCORE business plan outline, which is designed for startups but can easily be adapted for established businesses. The questions answered during the planning process feed directly into the sections of the business plan: Business Description – What do you do? Products/Services – What do you sell? Marketing plan – how will you sell it? Operational plan – how will you carry out the day-to-day work? Management plan – how will your business be managed and by whom? and the financial plan – how will you finance the business?

As you go through the steps of developing your strategy and drawing up your plan, it’s important to keep your end game in mind. Although no one can guarantee the success of your business, good planning builds a solid foundation for your business and minimizes your risk.

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