STRATEGIC PLANNING
Large companies place resources and focus on strategic planning at least once a year. Small businesses seldom complete a strategic plan. Yet in every way, planning is just as important to a small business as to a large business.
While operating a small business successfully can be very rewarding, the typical small business does not have the staying power financially to weather a business downturn. Avoiding a business downturn requires that business managers not only attend to the day-to-day functions of the business but also have an eye on the horizon so that “bumps in the road” can be managed.
How can the small business owner who already turns the operational crank and does the purchasing, pays the bills, handles the payroll, completes the customer billing, follows up on collections, maintains the equipment and schedules the work take on the additional task of strategic planning? The typical SUCCESSFUL small business owner has a limited staff and is working 55 to 60 hours per week without addressing strategic planning. It is due to this reality that outside consulting services are the logical choice to put a strategic plan in place. Consulting firms that focus on small business offer an affordable outsource for the small business owner to address planning, set performance targets and to track actual performance against those targets.
Because things change, strategic planning needs to be reviewed periodically. The “things” that impact strategic planning include:
- competition
- economy
- suppliers
- pricing issues
- delivery issues
- quality issues
- labor
- cost issues
- attendance issues
- quality issues
- staffing
- technology
- product or service
- equipment
It takes a certain amount of “research” to stay informed regarding these “things”.
But wait a minute! Does strategic planning make sense for you? You might ask, “If my trade is based on my skill and training, what business options do I really have? The plumber does plumbing. The electrician does electrical. The dry cleaner performs dry cleaning. The grocer purchases and resells groceries. Etc. So what’s to plan?”
All small business owners have a number of options regarding their business. A careful consideration of ANY small business reveals more complexity than you might imagine. Consider the options facing the corner hotdog vender.
Of course there are the operational decisions: supply source, inventory levels, product line, pricing etc. But there are several strategic decisions that are best made based on sound data and with careful consideration:
- What is the competition and where are they located? What advantages, if any, do they have? What advantages does my stand have, if any?
- What is happening to local demographics? i. e. Are ethnic groups moving into the area that have food preferences away from hotdogs?
- Have buying or eating habits changed overall? i.e. Do people want to pay with credit cards? Should condiments and drinks include some healthy options? Are changes occurring as to when people eat, such as increases in second/third shift workers?
- Are regulatory changes occurring that could impact my business, such as licensing or health inspections? This could signal a problem or an opportunity depending on the circumstances.
Effective strategic planning for your business can require several hours of work initially, but annual updates involve less time and effort. Initial planning includes market research and a comprehensive analysis of the strengths and weaknesses of your business. The idea is not to set up a defense against pending problems. Rather, strategic planning identifies opportunities to grow and prosper. In fact, what appear at first as problems are often really opportunities.
If your business has been negatively impacted by the recession, strategic planning becomes more critical. You might need to change certain aspects of your business to survive and prosper. The effective strategic plan will lead to an Action Plan that details the steps required to turn your business around and recognizes the limited resources you have available to drive the Action Plan.
In our next article we will examine some specific examples of Action Plans and Strategic Plans.
Charles F. Andrews of EagleSharp Small Business Consulting is an MBA financial manager. With over 35 years experience in financial planning and sales improvement strategies, he has successfully helped hundreds of small business improve their balance sheets and improve profitability. He has helped with turnarounds, securing new financing, and large scale accounting.
