Small business strategic planning: 10 tips to transform your company
Within our strategic planning practice we have worked with every conceivable type of business, large and small. Larger companies are more likely to engage in strategic planning, not because it is more relevant for them but because they tend to hire professional managers who understand the dramatic impact that a strategic plan can have on profitability and morale.
About half of Vistage members (I have worked with more than 50) engage in some type of strategic planning process, with varying degrees of formality. You may be wondering, why wouldn’t everybody want a plan?
One has to start by understanding the underlying psychology. We get caught in a trap, where the urgent nature of today’s work always takes precedence over strategy. We feel greater accomplishment from finishing routine tasks than attacking larger projects that deliver enterprise value but may require months to complete.
To be fair, small businesses are more strained for resources than larger companies. They do not have dedicated people for things such as research and development. But regardless of size, every entrepreneur should find time to be thoughtful about the future of their company. I have a vivid memory of sitting with a really smart young entrepreneur who wept in her office out of fear she could lose it all. The pressure on small business owners is immense, and a thoughtful planning process can chart a course to a successful future, one with more clarity and less stress.
One thing I have found is that many entrepreneurs have a plan in their head, and they are under the impression that is good enough; it isn’t. Lack of clarity manifests in poor decision making about new products, who to hire, where to staff a sales team and what equipment to buy. When these decisions are made in a vacuum and without sufficient data and context, a management team has to spend a lot of time unwinding mistakes. This is why the notion that we don’t have time to plan is really just a rationalization (one could even call it an excuse). The greater proportion of our time we spend planning (instead of reacting), the less time we expend.
Other small business owners will rationalize that they can’t plan because the world is a volatile place; and it is. But the businesses that plan what they can control, are in better position to react to the things that they can’t.
So here are 10 steps for small businesses to build a successful strategic planning process:
1. Include the right people
Often business owners are resistant to share information out of fear that it will end up in the wrong hands. So they keep a tight circle on who they have strategic conversations with. The problem with this is that the people closest to the customers are the ones with the most information about their problems, and potential solutions. In many companies, capable employees are unwilling to share their opinions. We encourage our clients to include as many people who they can trust (and who can think strategically) in their strategic planning process, and that tends to be a wider circle than they might expect.
2. Gather the data
Having access to pertinent market data is the number one barrier for most small businesses. Like investment bankers, we access industry reports on behalf of our clients but that is not practical for most businesses. However, there is a wealth of free information available at sources such as the Bureau of Labor Statistics, Bureau of Economic Analysis and low cost consumer research tools at sites such as gutcheckit.com.
Also, companies often do a poor job capturing and mining internal data. Every company should segment their reporting by channel, customer, product categories, etc. Surveying your strategy participants is also a useful way to gather information and rank strategic issues by importance.
If you are a really small company, these principles may be executed with five people but it is still the same.
3. Expect preparation
Strategic planning is garbage in, garbage out. Every person participating in strategic planning should be expected to prepare for a strategy conversation, whether that be by developing information or learning more about the mechanics of the business.
4. Create the right environment
Creating a safe harbor, a place where people feel safe about having strategy conversations is as important as making sure the physical environment (such as an off-site location) is suited to creativity. Many companies hire facilitators to keep the meeting on track.
5. Build your plan
Entrepreneurs have a lot of anxiety about writing a plan but it is actually the easy part if you have done your homework. Components of a strategic plan usually include things like an executive summary, financial projections, SWOT analysis, external factors, market/competitive analysis, vision map and action plan.
6. Focus on growth and value
Often companies engage in operational planning and call it strategic planning. Continuing to do what you have always done is not strategy at all (unless you have weighed alternatives). Focus on how you will grow the business, and in particular what product or service innovations will improve the customer experience.
7. Organize around strategic objectives and an actionable plan
The number one thing that should come out of a strategic plan is unity about four or five overarching objectives that serve as a script for the management team. They should be illustrated in some form of vision map that can be shared with managers (and perhaps all employees) throughout the company.
I get to clean up after a lot of companies who hold strategy sessions and fail to put their strategy into action. Don’t even bother doing strategic planning if you don’t come out of it with an actionable plan with an assigned champion and due dates. When action items are organized by objectives, the objectives remain alive even after action items are completed.
The most successful companies I have been around are the ones with clear intention about converting their strategic plan into their corporate DNA. They do this by:
- Sharing their vision map with a broad group of people
- Building a corporate scorecard
- Tie their performance management (including incentive plans) back to the strategy
- Celebrate wins and engage their employees in the process.
9. Execute relentlessly
As Mike Tyson once said, “everyone has a plan until they get punched in the mouth.”
If you only take one thing from this post it should be this: MEET WITH YOUR TEAM EVERY MONTH OR QUARTER TO REVIEW THE STRATEGY AND ACTION PLAN, PERIOD.
10. Think of strategic planning as a process and not an event
Companies operate on all types of cycles. Whether you engage in strategic planning annually or quarterly, it must be a repeatable process (strategy, budget, scorecard, performance management, action plan). Rinse and repeat every year.
Great leaders inspire others with their vision. They don’t get caught in the trap of being operators every day without connection to the broader strategy. Reinforce your plan every day, until every employee understands it and buys in to your vision.
Discover the most effective sounding board for your toughest decisions. As a small business owner, you may be so busy with urgent matters that you neglect the strategic decisions that drive long-term growth. Vistage helps you get out of the weeds, identify your blind spots and push your business forward. Get started here.