A better business plan

PROBABLY the most common question asked of me as a corporate adviser is: How do we write a good strategic plan?

Many businesses outsource the production of their strategic plan, often because they regard it as time-consuming process, sometimes because they think an outsider can do a better job of it than they can. Unfortunately, this process often leads to a lack of ownership of the strategies and commitments outlined in the plan.

The best person to prepare your strategic plan is you, as the business owner, or senior responsible executive.

If you have to use advisers for this type of work then use them to challenge your thinking, to brainstorm new ideas and to provide alternate views on existing strategies and options. Don’t use them to do your thinking for you.

So here’s a simple but robust strategic plan structure, with a few tips for content that will serve you very well, whether you are a large publicly listed firm, GOE, or a small to medium-sized business.

Vision and values: What do you want to achieve and what do you want to stand for? Dis-pense with all the time wasting and dysfunctional lan-guage that goes with articulating your mission statement – most firms spend way too much time internally focused at this point. Make your vision and values meaningful – to you and your people. These should take you a paragraph and few bullet points.

Strategic and financial position assessment: What’s going on in the industry, how are you positioned versus your competitors and how are you going financially – and that includes your balance sheet. Don’t fool yourself. If the words and numbers don’t gel to you, they won’t to an investor, board member, business partner or employee. Remember, it’s not good enough to make a profit, you need to earn an acceptable return on capital, and if you are investing in business segments that don’t earn an acceptable return over time, you are destroying shareholder wealth. It’s that simple. So get some facts, and if you don’t have any, start by asking your customers.

Key issues: Based on what you want to achieve and given the position the business is in, what are the key issues? Try to move beyond SWOT analysis here because that model confuses competitive position assessment with strategy development. Just think clearly about the issues you face. Try putting them into some categories strategic-financial-operational-organisational and then rank them in terms of complexity and importance.

Objectives: Now, and only now, should you set some objectives. First of all, what’s the main objective of the business – different to the vision, you need to be more specific. Then, what are the specific objectives – they are like sub-components of the main objective. If you are struggling, use the strategic-financial-operational-organisational approach.

Strategic options and statement of strategy: This is the most important component of your plan. Throw away that paperweight on your desk with the mission statement on it and replace it with a statement of strategy for the business. Tricky isn’t it! Not really, it’s how you are going to achieve your objectives. Strategy is the challenging bit though, 99 per cent perspiration, 1 per cent inspiration. Invest your time right here and remember one rule – a business strategy is not a response to an issue. Strategy is an integrated set of actions designed to achieve an objective, recognising the issues faced. You should consider more than one course of action – good strategy comes from considering more than one option.

Financial forecasts and cash flow budget: Run the numbers, and not just the P&L. You must forecast the balance sheet, otherwise you won’t know your cash position over time. All the new-age measures like economic profit, EVA and cash flow ROI have their basis in cash flow. So keep it simple and forecast your cash position, then you’ll know the impact of your investment program. And make sure to run a few ratios for reality checks.

Implementation timetable: To finish, drop the whole lot into a simple spreadsheet with some dates on it and stick to it. Strategy tracking and all sorts of hot new consulting technology centres around one age-old discipline – disciplined project management. So don’t just report your actuals-versus-budget, include updates which detail whether your strategy milestones are being met.

So there you have it. And rather than regarding your strategic plan as somewhat divorced from the everyday operations of the business, regard the planning process as central to your activities, so that you can live it on a day to day basis.

It is of no use and it’s probably a poor plan if you can’t pick it up once a month and say to yourself “yes, that’s right, that’s where we’re going with this business”, and feel excited about your direction.

Remember, a good strategic plan can easily be summarised on one page and it should inspire you and your team, regularly.

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