Strategic Planning

This time of the year tends to be a period of reflection for many people, especially small business owners who may feel that this is the first time they’ve been able to stop and take a breath all year. We look back and determine how the year has gone, the wins and losses, the good results and bad, the things we could have done better and the things that could have been worse.

It is also a time when we may sit down and plan on how we are going to ride the rollercoaster next year. In previous posts, I have tried to underline the importance of planning around your cash flow, your budget for the upcoming year and ensuring that you are managing your business effectively from a financial perspective. However, that is just the numbers. How do we come up with our numbers? Is it a bit of sticking our finger in the air to gauge the wind or is it a bit more scientific than that? There are many ways that a budget can be created. From taking last years performance and adding a bit (incremental) right through to starting each year from scratch (zero based). For a relatively new business, prior year performance isn’t really a great measure of what the future might hold. Conversely, the amount of work to produce a zero-based budget from scratch every year could be overkill.

A three-year strategic plan, which can then be used to underpin the numbers with actionable goals, supported with how we are going to achieve them and how we measure progress, can provide us with the vision of what we actually need to do to achieve our targets. Below are five areas that together can provide a good view of the business and can then be used to form a three-year financial plan for your business. I’ve used three years as it is relatively medium term but this can be used for longer or shorter periods. The five areas are as follows:

What do we want to do?

This is where we can outline the ambitions of the business. For my own plan, I have highlighted that I would like to add two clients per month to our bookkeeping division over the life of the plan. In this area you want to be pretty specific about what you would like to achieve and be able to measure it. For example, 2 new bookkeeping clients per month by 30 June 2020 is one of mine. I then apply the same every six months so that I can gauge progress on a monthly basis and take the necessary steps to catch up if I need to.

Be ambitious but don’t set yourself up to fail. As I’ve said in other posts, there is little point in establishing a plan which looks amazing on paper but is unlikely to be achieved.

Where are we going to be successful?

I have been looking at marketing concepts a great deal lately. Identifying my target market(s) for the different aspects of Cariad has meant that I have had to dial down onto which types of business I am looking to work with. These then become my avatars and where I will focus my marketing efforts. If you can identify where you think you are most likely to be successful, then you will be focusing your efforts effectively. One analogy I like is that you are using a sniper rifle instead of a shotgun.

What does success look like?

This is where we can visualize what we need to do in order to be able to achieve our goals. It can be described as “If we do x and x and x and x then we will achieve y”. In this area you need to look at what you need to develop within your business in order to achieve your vision for the organization. The y in the quotations is what you wish your business to look like if it is successful. If you can determine that first you can then determine the things you need to do to get there.

What do we need to achieve it?

Its all well and good deciding that I am going to grow my bookkeeping division by 2 clients per month but how am I going to deliver the work when I have finite time of my own which is pretty much taken up between my Virtual CFO work and overall business management? So, I now need to determine what I need to have in place in order to deliver. Am I going to employ or have a network of subcontractors? What software am I going to use? How am I going to keep track of it all? Do I need a CRM?

These are all areas that can be highlighted in this section of your plan to ensure that you are getting a full understanding of what your business needs to achieve the first three columns.

How do I measure progress?

We’ve talked about management reporting of your financials in previous articles but how are you going to measure progress against non-financial items such as your sales pipeline for example. This section will force you to think about what information you are going to need from both a financial and non-financial perspective in order to manage the business effectively.

You could include monthly financials, sales report, number of complaints, social media interactions or any number of feedback loops that are relevant to you and your business.

Finally, the document doesn’t have to be war and peace, but the action of studying these aspects of your business can put you on the front foot compared to your competition as many of them won’t be putting the time and effort required in to effectively plan their business for the future to this extent. You never know what lightbulb moments you may get if you take a step back and have a think about your business strategically for a little while, in a structured manner, instead of staying caught up in doing the doing.