Strategic Planning or Die

Posted By Pedro Gonzalez, CPA on Jan 12, 2017 | 0 comments


 

Well you will not die if you lack strategic planning. However, your business will most likely will. Strategic planning can be defined as an organization’s process of defining its strategy (direction) and making decision on allocation of resources to pursue this strategy. However, to determine the direction of any organization, we must know the current position and the possible realistic avenues through which it can pursue a particular course of action.

 

Most large corporations understand that a strategic plan is a directional map to help them increase their chances of success; in this case financial success. However, strategic planning is not limited to achieving financial success. Even non-profit organizations, government and families can benefit from strategic planning.

 

Most entrepreneurs usually do not start out their business ventures with strategic planning in mind. One of the main reasons for the lack of strategic planning in the early stages is because their “internal drive for success” is so strong and so motivating that they do not want to wait to get started. Their drive is so strong that they are willing to navigate blind in the ocean and figure out the direction as they go. However, this is also the main reason why most small businesses fail within the first five years of operation and 80% of them shut-down within the first ten years of operation.

Some entrepreneurs think it is “everyone else who needs strategic planning”. However, it is this arrogance and lack of clarity of direction that leads most of them to crash against a brick wall. In his book “Small Business Management”, Michael Ames gives the following reasons for small business failure:

 

  1. Lack of experience
  2. Insufficient capital
  3. Poor location
  4. Poor inventory management
  5. Over-investment in fixed assets
  6. Poor credit arrangements
  7. Personal use of business funds
  8. Unexpected growth

Gustav Berle adds two more reasons in The Do It Yourself Business Book:

  1. Competition
  2. Low sales

 

There are strong believers that companies do not need strategic planning. After all, there has been success stories of those who have created a successful company with no business plan or strategic planning. They just followed their “gut feeling”. However, it cannot be denied that the odds are against you if you do not have basic strategic planning in your business.
Here are five common mistakes made in the strategic planning process that you should avoid:

  1. Going through the motion – this is having a plan for the sake of having a plan. You will get out of the plan exactly what you put into the plan.
  2. Putting the plan on the shelf – this is as bad as not writing the plan. To be effective your strategic plan must be implemented and reviewed continually.
  3. Unwillingness to change – to get different results, you have to do something different.
  4. Ignoring or discounting the reality of the risks of your industry – Just because it has not happened to you yet it may not mean that will never happen to your business. Many industries have an inherent risk, you must acknowledge them and prepare for them, burying your head in the sand will not solve it.
  5. Unrealistic expectations and lack of focus – goals must be SMART (Specific, Measurable, Attainable, Relevant, and Time-bound). It is better to establish a few goals and be focused about them than lots of goals and be vague about them.

 

Starting a Business? Why You Need to Know Strategic Planning

If you are launching your startup with plans for significant growth, strategic planning is your key to gain a competitive edge. When starting your business, you must avoid the mistake of most first-time entrepreneurs just “going with the flow”. Unfortunately, if you follow this business philosophy you will most likely end up unprepared for the growth spurts and sudden fluctuations of business.

Strategic planning starts with a well-defined goal, for example “increase revenue by 20% in six months”. The common goal of entrepreneur wannabes of “make more money” is not a goal, it is just a wish. As you define your goals for your business, make sure to include the factors of a SMART goal mentioned above. Next, break down each goal into the specific steps, or objectives, that are necessary to reach those goals. For example, if your goal is to increase revenue within the next six months, it may be necessary to hire another salesperson, evaluate the inventory system, engage in targeted marketing, and step up the networking. For each of these objectives, there are likely a number of specific tasks necessary to achieve them.

Launching and running a startup can be a chaotic and stressful journey. A solid strategic planning is how you counter act the roller coaster motions; it provides the stability needed by your business withstand the storm and profit on the good ones. Invest the necessary time to implement ongoing strategic planning into your business and reap the rewards.

Finally, if you are going to invest on strategic planning do it right. Many entrepreneurs complain that they have not achieve the expected success after the strategic planning. We need to be honest with ourselves about this. This is like the person that starts an exercise program, after being advised to lose weight and the person continues an unhealthy eating habit and the person goes to complain to the doctor that he/she wasted his/her time with the doctor’s advice.

 

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