Recently, I met with a very successful business owner who told me that his strategy for growing his business was to get referrals from satisfied clients and centres of influence. While that is an effective method or tactic for growing a business, it is not a strategy.
We define strategy as the alignment of 3 elements:
- The outputs or objectives you want to achieve.
- The capabilities and resources you have available to realize your objectives.
- The opportunities and challenges the environment provides.
It is important to address each of these elements as you develop your strategy for your business. The articulation of your strategy is your business plan. The format we use for business planning is designed to address each of the three essential elements of strategic planning.
Your business plan consists of 4 inter-related elements.
A. Strategy – In this part of the business plan, you first describe your Business Definition: Vision, Mission, Values and Business Opportunity. Your business plan should clearly articulate your picture of the business and the direction in which you are taking it. The vision statement answers the question, “Where are we going?” The mission statement describes your purpose and answers the question, “Why are we here?” Your value statement answers the question, “What is important to us?” Values are the things or conditions you consistently want to express. The final element in defining your business is the business opportunity. This segment of your business plan addresses four questions: 1. How do you make your money? 2. How do you spend your time? 3. Who do you sell to? And 4. What do you sell them?
After you have clearly articulated your Business Definigion, you want to move to setting objectives. An objective is a specific, measurable result, within a stated timeframe. The starting point in setting objectives is to identify your five-year key objectives. Then, you work back to identify your one-year objectives. The final step is to analyze where you are today. This is known as a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). By defining your business, setting objectives and completing a SWOT analysis, you can now do an issues analysis to identify the issues that must be addressed to align objectives, systems and capabilities with the opportunities and challenges the environment provides.
B. Structure – At this point, you are in a position to prepare your resource plan. This plan looks at the systems and capabilities you will need in order to reach your objectives. The final step in the strategy segment of your business plan is to identify major tasks and potential roadblocks. In any given timeframe, there will be a small number of tasks that are critical to your business success. Failure to focus on these major tasks can lead to business failure. Finally, the identification of potential challenges can help you to anticipate how you will deal with these potential roadblocks.
C. Systems and Processes – Your systems and processes are the operational strategies that describe what you are going to do to realize your objectives with the appropriate systems and capabilities to take advantage of market opportunities and overcome any challenges you foresee. The first step is to prepare your marketing plan. The plan details what marketing activities you will initiate to build your brand and create a unique identity in your chosen market(s). The next step is to prepare your sales plan. The sales plan outlines who you will sell to, what you will sell them and when you will sell them. The service plan describes the service activities you will engage in to get and keep clients. Your service plan also highlights your value proposition. Once you have completed your marketing, sales and service plans, you can determine how to integrate these activities and assess the resources you will need to fulfill each aspect of your business plan.
D. Financial Management – The last part of the business plan deals with the financial aspects of your business. To be successful as an entrepreneur, you must take the time to fully comprehend the business financials, both historical and pro forma. The business plan will include historical financial information about the business, and a pro-forma analysis to show the anticipated revenue, expenses and profit going forward.
It is important to remember that your business plan is a snapshot of a moving picture. For entrepreneurs, it is important to view business planning as an iterative process. Since change is the only constant, you need to schedule time on an ongoing basis to review and update your business plan. In other words, having a business plan is only one aspect of developing and implementing strategy. In our work, we find most entrepreneurs spend very little time on strategy each week or month. It is little wonder how so many feel the effect of the environment, rather than masters of their own destiny.