Strategic planning is important for small business.
If you lack a solid strategic plan that defines where your company is heading you’re not in control of your firm’s future. Always reactive to market conditions and playing catch-up to the competition.
How can you tell if your firm needs a strategic plan? Let’s take a look at some warning signs.
Small Business Is Important For Small Business
Here are some situations where a company can benefit greatly from strategic planning:
It’s not clear where the business is going to be in 2 – 3 years
Management guru Peter Drucker said, “The best way to predict the future is to create it.”
Without a clear grip on where your business is heading, you’re not really in charge of the firm’s destiny.
Without a plan, the business has no direction, no roadmap for achieving whatever goals it may have. The business is simply floating with the current created by market conditions. You’ll probably end up somewhere where you don’t want to be.
The organization is reactive
You are always in a reactive mode. Customers, competitors, and external events drive your day-to-day decisions. Is the company running you, or are you running the company? Does it feel like you’re in charge of the company’s future?
Without a sound strategic plan, you lack the foundation and direction for taking the initiative and heading toward the goals you’ve set.
Priorities are constantly shifting
As a result of the lack of any strategic direction, priorities are changing all the time. Projects come and go. Some projects get started and then get canceled halfway through. Other projects don’t get off the ground at all. The few projects that do get completed are often behind schedule and over budget.
Due to always changing priorities projects are not defined properly. And the commitment to carry through isn’t there because there’s always another priority that pops up.
There is never time to reflect on the key issues and what it will take to make the business successful. Short-term thinking is prevalent and management has adopted an “idea of the month” mindset.
Strategy without tactics is the slowest route to victory.
Tactics without strategy is the noise before defeat.
Sun Tzu – The Art of War
Sales targets will not be met (again)
That revenue target was probably a wild guess, anyway. You’re lacking the insight and tools to set good revenue targets. The sales targets were perhaps no more than inspired guesses, or wishful thinking – not based on real information and sound planning and forecasting.
A good strategic plan specifies how and where the company is going to make money over the long run and how the company will beat (or avoid) the competition. It includes best-effort revenue forecasts based on insight, not guesswork.
Sales have been flat for years
If sales have been flat (or worse) for years and you are out of ideas on how to turn things around, this is the time to go back to basics. A structured strategic planning process takes you through a comprehensive review of the company and market conditions. You’ll identify the strengths to be leveraged, the weaknesses that need to get fixed, and the best market opportunities to pursue.
Developing a strategic plan reinvigorates the business, wakes up the boardroom, and creates a clear path to the future.
Every opportunity looks as good as the next one
It’s not uncommon for firms to chase every shiny object that pops up. Due to a lack of vision and focus you don’t know which opportunities to pursue and which ones to ignore. So, to be on the safe side, you go after all of them.
This lack of focus leads to resources getting spread way too thin. As a result, even the worthwhile opportunities may not pan out because they were not given the right level of attention.
Business strategy is all about focusing on the right issues and making decisions about what the company will be selling and to whom. At the same time, deciding what not to do is just as important, perhaps even more so.
It is difficult to say “No”
Saying “yes” to a customer or a project is so much easier than saying “no”. But, not every customer is the right fit for your firm. And not every business opportunity that comes along is worthwhile pursuing.
Remember, trying to be all things to all people is not a good business strategy.
Important trends and their impact on the business are being missed
The demands of day-to-day activities are so overwhelming that you never have time to stay on top of what’s happening in the industry, among customers, developments in technology, and so on. You don’t find out what’s going on until after the event.
Good strategic planning identifies key trends in the marketplace and evaluates their impact on the business. This insight can then help to define initiatives to take advantage of positive trends.
For the same reason that you can miss future growth opportunities, you can fail to see any potential threats to your business. If you did, you could put contingencies in place. But you don’t, and you don’t realize a threat until it’s too late.
You don’t really know your customers and why they are buying
You basically sell to anyone with a heartbeat and a checkbook, without fully understanding which customer segments are profitable or unprofitable, how much selling effort is required, and why they are buying from you versus the competition.
Which market segments are the best fit for the long-term growth of your business? Strategic planning provides the answers and formulates the actions needed to be successful in the most attractive market segment.
You don’t know which markets to target
Not all markets are equally attractive. What works for one firm may not work for another. You need to understand why and make smart choices.
From a strategic perspective, it can make a lot of sense to abandon certain market segments in order to focus on those segments that represent the best future growth opportunities. Do you know which markets you should be focussing on?
The organization is ill-prepared to seize new opportunities
You lack the right information and processes for making sound and timely decisions. You don’t see new opportunities until the competition is already well established. And, because of poor internal communication, lack of reliable data, and slow decision-making, it takes far too long to get anything off the ground in a timely fashion.
These new opportunities are no longer “hot” by the time your organization comes around to looking at them.
The competition is winning and you don’t know what to do
You’re not quite sure how they do it, but the competition is beating you. You lack insight into why the competition is doing so well, and you don’t know whether or how to fight them or get out of the way.
In addition, lacking clearly defined target markets, it is very difficult to determine who your competitors really are. Your sales and marketing efforts are diluted and not effective.
Strategic planning helps you to determine which markets you should target, and why, and how to beat (or avoid) the competition.
Managers don’t share the same vision
The lack of a shared vision results in a poorly defined direction for the company. No mission statement and lack of internal communication about long-term goals and objectives or how to achieve them. Any discussions about longer-term goals are considered a waste of time and always pivot back to short-term issues.
A robust strategic planning process engages management in deep discussions about the past, present, and future of the business. As a result of everyone participating in the discussions, the vision is shared and buy-in is achieved.
Employees have no idea what the company is about and where it’s going
Employees are confused, and not all working towards the same goals. Miscommunication and mistakes run rampant. Your best employees are leaving and it’s difficult to attract top talent.
A good strategic plan defines a clear direction and goals. This makes it easier for management to communicate where the company is heading to the employees. Everyone is on the same page.
Work On Your Future, Create a Strategic Plan
If any of these symptoms look familiar your small business will benefit from strategic planning.
Stop being preoccupied with putting out operational fires. Don’t ignore the need of creating a plan for the future of your firm. It is time to become proactive and take the initiative.