As a business owner in a sluggish economy, you may be facing a decline in sales, poor cash flow, aging accounts receivables, and dwindling profit margins. Tight financial times are causing most businesses some degree of pain, but this burden can play havoc on a small company.
In adverse situations, there is a tendency to be ‘reactive’ as opposed to ‘proactive’ in managing the business. Certainly, it is crucial to respond quickly to changes in market conditions. However, if the business doesn’t have a strategic plan, management behavior is based on the ‘here and now’ without foresight into the long-term effects of random, reactionary decisions.
Rather than continuing to react to the market, which will eventually lead to your business running you rather than you running the business, now might be the right time to step back and develop a strategic plan. Otherwise, your reactionary mode can lead your business to financial ruin.
Just what is involved in thinking strategically? First you must get all your key players on board and supportive of the process. You will also need the commitment of all employees, so keeping them involved will be important for plan implementation and support.
Strategic planning can be divided into ten basic steps. Step one is the vision statement. This is the ‘dream’ of what you want the business to look like in three years and beyond in terms of its appearance, products, profits, location, size, and customers.
After the vision statement comes the mission statement. The mission statement provides a consistent picture of your company and a purpose for all in your organization. It describes what the business does, says who you are, what you stand for, what you do, who you do it for, why you do it, and how you are competitive. The mission statement helps the business to stay focused.
The third step is to clearly define the company’s corporate values–the innate values and standards or principles by which the company will carry out its operations in relationship with society, customers, employees, suppliers, the local community, and other stakeholders.
Corporate objectives are determined next. Explicitly state the company’s objectives in terms of the results you desire in the next three to five years. Objectives should relate to the expectations of all major stakeholders and reflect the underlying reasons for running a business. Objectives should be challenging but realistic. When determining objectives, refer to the mission statement to stay focused, and ensure objectives are in line with who you say you are and what you say you do.
Of course, you cannot develop an effective plan without a thorough audit of your business’s operation and the market environment. This leads to step five, the SWOT Analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are ‘internal’ and refer to aspects of your operations such as marketing, technology, finances, human capital, products, management, R&D, and other systems. Opportunities and threats refer to the external environment in which you do business–competition, industry and social trends, economy, political and legal environments, and markets. You lack control over the external, but it impacts the ultimate success or failure of your business. Your goal in the SWOT Analysis is to evaluate your situation so that you may utilize strengths to capitalize on opportunities and minimize threats and determine ways to improve on weaknesses.
Step six is to revisit steps one through four. Given the outcome of the SWOT Analysis, do any changes need to be made to the vision, mission, values, or objectives?
If steps one through six ‘mesh,’ you can develop strategies. Strategies describe the company’s approach to the marketplace given its inherent vision, mission, values, and objectives. Strategies should build on strengths, resolve weaknesses, exploit opportunities, and avoid threats. Strategies can be companywide, such as mergers and acquisitions, product or market development, or market penetration. You may also develop strategies at the functional level.
Step eight is to develop specific, shorter-term goals. Goals should be quantifiable, realistic, and time-based. Goals are what the company hopes to achieve by implementing strategies in pursuit of company objectives.
The final two steps of strategic planning are development of strategic action programs and implementation. Action programs are the tools that set out implementation plans for key strategies. They cover resources, time frames, budgets, deadlines, and performance targets. Finally, a plan that is not implemented is an exercise in futility. Designate a time for implementation and assign responsibility for various tasks.
By always thinking strategically, when difficult financial times hit, business owners are better prepared to respond to the changes is market conditions in a way that keeps the business focused on its mission and long-term objectives. The Georgia SBDC Network assists small businesses with strategic planning audits and retreats. To find the Center nearest you, visit our web site at www.sbdc.uga.edu.
(Source: Sharon Macaluso, SBDC Decatur Office)