Strategic business planning is one of the most overlooked areas of running a business. It is a time-consuming process that provides no immediate results, but one that can set the groundwork for the success of a business.
A strategic business plan is a document that sets out in detail the company’s strategic direction, targets, goals and actions it will take to achieve those objectives. The plan also encompasses any new investments or divestitures and their potential impact on the organization.
In very large organizations, the CEO, CFO, management team and the Board work together to develop strategic business plans. In small and medium-sized businesses the same should hold true; however, the management team is often spread very thin, does not have all the key roles filled and is highly involved in day-to-day operations. This dynamic results in the long-term planning being rushed or pushed aside to deal with today’s challenges and immediate opportunities. Here are the significant reasons to develop and continually refine a strategic business plan alongside a seasoned financial professional.
You worry about where your business is headed in the long term. CEOs have lots to worry about on a day-to-day basis, but it is comforting to know that your business is headed towards achieving a rigorously tested set of objectives. A strategic plan encompasses key organizational requirements like: whether you have the right management and operational team in place and if you have the funds you require to operate in the short and long term. These are just two of the important facets of the plan. There are many others that require careful consideration.
You have no time to plan when you are working hard at getting things done. CEOs and principals of small to medium sized businesses typically do not have the time to spend on strategic thinking, never mind the time to document the results and obtain buy-in from the business’ key stakeholders like lenders, investors, Boards, management and employees.
You feel like your existing strategic plan is always out of date. Changes to a business’ strategic direction can be common place in the startup and growth phases, and during turbulent market cycles. Change during these times has to be managed. The best laid plan is useless if it is not updated to reflect the new reality affecting the business.
You prepared a plan, but you do not have a trusted advisor to test it. Many business owners do not have a board or investors to report to regarding long term planning. Sometimes an owner prepares a great plan, and saves it on her computer to review next year. A CFO who is a strategic thinker and comes to the business with objectivity can test the assumptions in the plan and hold the management team accountable for results.
Your strategic plan is not supported by sound financial planning and forecasting. Strategic plans must be supported by long term financial plans that can form the basis for annual budgeting. A strategic business plan is incomplete and can be ineffective if not proven by a sound financial forecast.
Strategic plans show the owner the path to major milestones. Business planning is like mapping out the life of a business. A strategic plan will assess when you can or should repay the bank loan, invests in new capital assets, pursue acquisitions, distribute equity to shareholders, expand the business’ footprint, open new markets or divest assets or divisions.
Unlike other firms that that can help develop a strategic plan, we take the extra step of actually helping to implement the plan. This includes identifying, creating and consistently tracking key performance indicators to measure progress against the strategic plan.