Setting a strategic plan for your business

Introduction

There comes a point in every business or a team when you need to stop and reflect on the future, you may ask yourself where are you going, or even why are you still doing this month after month, year after year. This short pamphlet is written for those who I have coached, because at some point in your future career you will need this. I anticipate that you will be either running your own business, be part of a senior leadership team or running a team.

When the time comes, dust this off and it will help you.

In my experience the vast majority of businesses tend to set a vision and write a plan on previous performance and add a bit on hoping they will arrive at a destination without really knowing what that destination is. This is true for a business as a whole and at a team level so the methodology in this document can be applied in either scenario.

The thought of setting a strategic plan can appear daunting, what I am giving you here is a logical approach to that challenge. When I ask business owners what they want to do with the business, the answer is normally something like I want to sell the business in five years. Ask them two years later and the answer will be the same. Often I find people are not clear if they are creating a business they want to sell or have a lifestyle business. A lifestyle business being one in which you own and take an income from but are only involved in the business from a board participation perspective.

This makes decision making hard, what seems like a sensible decision at the time, turns out to be a bad one further down the line. As business owners or when heading a team you are leading your business and ideally getting everyone to make good decisions in the hope you get to a destination, that even you do not know. Staff find this frustrating and you waste so much time and money trying things in the hope it will get you to that mythical destination.

This is quite common and is often simply caused by the time pressure of running the business. Taking a step back is hard when you need to keep the lights on and make payroll. It’s like being on a hamster wheel and never having the time, energy or indeed bravery to jump off and slow the wheel down. The truth of it is you need to take time out from working in your business to work on your business. Step off you must if you want a peaceful life and for the headstone on your grave not to say “Here lies xxx they worked hard”.

To make the point imagine I am commanding a group of marines on an exercise, holed up in a wood in relative cover on Dartmoor. I tell the group to get their packs on and follow me. Dutifully they will do so, I'm the boss they are a disciplined and well trained force so will do what they are told. I am sure I would not reach the edge of the wood before someone asked me "where are we going boss?" or "what's the mission?". If I told them not to worry and follow me, we would carry on a little further with growing discontent in the ranks caused by uncertainty. A little further on the guy carrying the rope we had in the section decides to drop it down so that he can pick it up on the way back into our location, working on the premise that the boss would have told me if I needed it. He has taken a decision to lighten his load so he can be more agile. For him this is a sound decision which he is making for the good of the section. Additionally the rest of the section decide to start drinking their supply of water once again working on the premise that we cannot be out on a long mission as the boss would have told us. Once again a sound idea to keep hydrated so not a bad decision just one being made without knowing the full facts.

As it happens we were out for a least 12 hours and needed to keep our water supply intact, and we also had two river crossings, so we needed that rope. My chances of achieving the objective had been severely curtailed by my leadership or lack of it. If I had clarity on the objective, was clear what resources and capability I had, I could have planned and executed the mission with a greater degree of success.

If I didn't know the destination I was unable to plan a route, I wouldn't know if I had the right equipment and skills and my chance of success were quite limited. Simply leaving a location and hoping you will bump into the enemy of unknown strength is a pretty sure recipe for disaster.

In a business context this often shows up as a bunch of people turning up to work to do the same job they did yesterday, get a bit more business and trying to do it a bit more efficiently. They are making decisions everyday in the belief they are helping the business and often those decisions are not helping you as a leader. When this happens the leadership start to manage rather than lead, staff tend to stop making decisions for fear of getting things wrong and generally everything becomes a bit more difficult to achieve.

Having a clear vision for your business brings a sense of focus, it enables you to make good decisions in the confidence you are going in the right direction. A vision helps you be more gentle with yourself and those who work for you, through knowing what to do when on your journey. A vision helps you control the pace of growth, and takes into account how much risk you are prepared to take to achieve the outcome you desire. At a higher level it can give you a sense of purpose, a reason for what you do which is more than about making money.

Strategic planning - The five step process

There is of course a major challenge in setting a vision namely the limitation of your own ability or belief to be able to execute on that vision. For the most part we all have fear at some level and this shows up in the fear of meeting expectations set by others and by ourselves, fear of not meeting our responsibilities or maybe fear of being the success you didn’t know you could be.

This is a myth of course, because most of the fears are made up in our own heads. The truth of it is you can achieve pretty much whatever you want and way beyond what you believe is possible. It may be that you just need a little help from those who have travelled the path before. To set a vision ask yourself the following questions:

Do you have a clear purpose to running your business, does it stand for something more than making money?

If it is money, what is your number?

What do you want the business to give you in terms of stress, time and money?

Am I building a lifestyle business or a business to sell? (Be that to an external investor, being acquired, employee trust scheme or a management buy out)

Your answer to these questions should help you reach a conclusion. If you own the business with others they would also need to come up with their own vision for what they want. This exercise alone will open up some interesting conversations. The point of the exercise is that you must have something you are aiming for otherwise you cannot build a coherent plan. Your business or indeed team will be reactionary and people will find it hard to help you achieve the things you want the business to give you and your family.

Once you have identified a common vision you can now set about building a plan which is where you adopt a 5 step process.

Strategic planning - The five step process

This systematic approach to setting a strategic plan is something which will take some time to do well. The system is adapted from the way I was trained as a member of commando forces on how you could successfully take an objective. There are some subtle differences in that in business you are generally not operating in the middle of a battlefield, other than that the methodology of “Prior Planning Prevents P*** Poor Performance” the 6P’s apply. It’s a slow down to speed up approach.

One of things you must do is document the whole of the process or at least get someone to document it. Writing it down is critically important for everyone involved to be absolutely on the same page. This will prevent misunderstandings and reduce frustration. People in the business will make better decisions and the business will arrive at the destination far quicker.

Step 1 Research

Before any decision about achieving the vision can be made you must first clearly understand where the business is today. I often find that business owners believe they have a handle on the numbers but after a bit of questioning that is not the case. I would often find for example that a business owner wouldn’t really understand which clients were the most profitable, but would normally know which one gave them the most revenue or shouted the loudest.

The length of time it takes to do the research will depend on a number of factors namely the size of the business and your own propensity for detail. The better the research the better the outcome, but be careful not to get sucked into doing at the cost of taking a step forward. You will never know everything but you can know a lot more than you currently do about your business.

Use people in the business to do some of the research, don’t do it all yourself, remember you need to keep the business running and keep the lights on. This has the added advantage of inclusivity, when we get to implementation this will be important to the successful delivery of the plan.

In the “Marines in a wood” analogy if I knew the objective I would conduct internal research to understand the state of my men, who had injuries, when did they last eat etc. I would also want to know the state of our equipment for example when were the radio batteries last charged, how much ammunition we had etc. I would then conduct external research through studying maps, looking at the ground, maybe sending out a recce party for some of the route, talking to others who had travelled part of the ground we had to cover.

The research is broken down into two elements, internal and external. If you run a business or indeed a team as the methodology works just as well at a team level, I would encourage you to share the burden of the research. The more people you can get involved the better as they will own it and have a vested interest in the outcome it will drive.

The internal research is looking to understand the facts, figures and internal perceptions of the business. The external research is to understand the competitive landscape both now and in the future and the business is perceived by others. Remember to keep balance when doing the research. You do not want to spend too long on this but equally well you need to ensure you are as thorough as you can be. The better the research the better the outcome.

Note: Perceptions are important because they are someones reality and not necessarily based in fact.Often the research phase is a huge learning exercise in itself and some immediate gains can be made to either improve profitability, or better still create more time.

Internal Research Tasks

Business profitability - Look at the revenue and profitability numbers over the last five years to understand what has happened with clarity. Profitability is the most important number of course.

Client profitability - Understand and document the profitability of each file or customer account remembering to factor in all of the management, admin, sales and finance time spent. This time can be calculated as a number based upon the people’s involved day rate.

Volume of orders placed with the business by client - What You are looking for here is who is a serial purchaser of your goods/services. You probably think you know this but often I find this not to be the case and those who shout the loudest and take up a lot of your time in the sales process will not be repeat clients.

Market sector of the clients - understand to see if there is any areas which may form part of the plan going forward.

Client source - understand if the business comes from existing clients (if so how much) or whether it is a new source. This will help you decide the best place to spend energy in the future from a business development perspective.

Deals lost - Often people don’t like to analyse deals because all too quickly they move onto winning the next one, however there be a pattern which may be of use.

Client geography - Once again you are looking for patterns. Do you have a large concentration of business in certain locations? When analysed in conjunction with the profitability numbers does that tell you something.

Current structure - How is the business organised? Often a business can lose focus here because as time passes you can become a little dysfunctional. Getting clarity at this stage is important as you will need to make sure you have the right people doing the right jobs to achieve whatever the desired objective is.

Understand the demographics of your people in terms of generations, communication preferences and attitude to risk. These are the people that will help you get to where you want to go so lets understand them.

Current skills in the business - Are there liabilities in terms of reliance upon key individuals? Is there succession plans in place for the owners of the business if disposal of the business is part of the vision?

Working hours analysis of all staff - Who does what and how long do thy take doing it? Do You have any duplication of responsibilities or reporting lines? A simple exercise to do is to get everyone or a sample of roles to record how they spend each day for a month. Look for how much time we spend in administration, selling, delivering to clients, working on the future of the business etc. Ask yourself what you learn from that and see what needs to be added to the plan to correct any imbalance.

Current culture of the business - how would you best describe the culture in the business in three words? Maybe ask people at different levels in the business what three words they would use to describe the mood of the business. What you are trying to understand here is if you have the right culture to move forward or whether you need to address it to enable us to achieve our agreed vision.

External Research Tasks

Understand what others think about us - often the perception you have of your own business differs from the perception a client, partner or supplier may have. Owners in particular tend to see the business through rose tinted glasses and believe people buy for one reason that can be different to why they actually buy. The external research aspect is designed to understand exactly what everyone thinks about the business. If you like the unvarnished truth. Typically conducted by a third party as clients have an existing relationship, which is good or bad and may give the answers you want to hear. The survey will seek to understand

Who are clients, suppliers and partners perceive we do business with

How clients, suppliers and partners perceive our service

What do our clients, suppliers and partners understand the scope of what we do

What is the perception of our clients, suppliers and partners in relation to our pricing. Are we seen by them to be expensive, cheap or just the same as everyone else.

Understand the market in which the business operates. More specially you want to understand the market in which you operate in terms of what it will look like in the short and long term. If part of your plan is to sell the business at some point You have to understand what the market is likely to look like at that time.

When the research has been completed and analysed, you now have a wealth of knowledge about the business and the market in which it operates. You can now plan from a position of knowing, and start to explore different ways of getting to the vision.

Step 2 Options

From the research ideas will have started to pop into your head. My encouragement would be to think of multiple different options not just concentrate on one. You cannot decide on an option until you have had a conversation about risk with yourself, significant other and fellow business owners.

Risk is a conversation often not had in a boardroom and of course it is extremely relevant. Every person has a different relationship with risk and this governs how we make decisions. For most your risk factor depends upon experience, upbringing and circumstances. If we have a situation in a boardroom where we have an MD, a Sales Director, Finance Director and Ops Director the chances are on a scale of 1 to 10 where 1 is safe and secure and 10 means betting the house on the number 9 in the 3.30 at Newbury, we will have different places on that scale. Typically the FD is more cautious and mindful of the numbers say around 3 or 4, the Sales Director is the major risk taker so will tend to make decisions around 8, the Ops Director and MD being somewhere around 5. The Finance Director in this situation will often suck through their teeth when suggestions are made and block things happening. The Sales Director will be frustrated that the business isn’t moving quick enough.

From a strategic plan to achieve the vision a conversation on risk needs to take place so presenting options is a worthwhile exercise. Maybe one option would be ultra safe ie “Do nothing” stay as you are. A radical option might be borrow the money and do it in six months. There will be many options, the important thing as a business owner at this stage in the process is to explore all options. Certainly the options should include ones that you might not be quite sure how to do, it is important to stretch your thinking at this point. Talk to others you have been there before, as I often say to clients, get your head up and consider what is possible even if you don’t know how.

If we go back to the “Marines in a wood” analogy armed with my research I would then consider multiple routes to ensure we had the best chance of arriving at the objective in good health and with the maximum possibility of taking the objective. I would choose a route which best suited both our capabilities and the timescales by which my orders dictated the powers that be wanted the objective taken.

As you work through the various options it is most likely that one of them will float to the surface as the one that best suits us in terms of risk and time.

Step 3 Plan

The plan is how you are going to achieve your vision. I always tend towards a phased approach purely based upon experience of running businesses, but your plan is your plan. The plan is a documented one not just something you talk about. When presenting the plan it is important to show your “Working out” or the research and what you considered to develop the plan. You will find the plan is accepted more readily if you take the trouble to go through how you came to decide upon the plan, rather than just launch into it.

The documented strategy plan will outline how to execute, manage and monitor the project execution with clear understanding of the Return on investment (ROI), Return on culture (ROC) and Return on value (ROV).

Any project must have a financial benefit and this may come in one of these three ways or maybe more than one of them.

ROI is self explanatory, how much will it cost and what will the expected return be.

ROC is all about understanding what the impact on the culture will be. Often this is quite a commercial gain for the business, the savings in a reduction in staff turnover can be significant, so ROC is actually a number.

ROV is how much the business is worth. The value of a business has importance when you have a desire to raise capital or to sell the business. The plan should demonstrate how the multiple of the business will be effected positively. Consider it as creating what the business will be worth once the plan has been implemented.

What’s in the plan

The documented strategy plan supported by a presentation for the owners/senior leadership team/stakeholders will explain the Why, What and How of the project. Committing the plan to paper makes it real and helps the stakeholders understand the thinking behind the solution the team has designed. The paper will have a recommendation for the owners/senior leadership team/stakeholders consideration, detailing

The expected outcome in terms of

The numbers - Revenue and profit (numbers but no timescale)

The clients - descriptive AB not C* (be as detailed as you can here, the narrower the focus the easy sourcing clients will be. Fish with a rod not a net)

The people - Structure to deliver the revenue (I find it helpful to draw out the team/company structure on a functional basis rather than a personality basis). Also the culture of the business you want to exist.

Infrastructure - Systems and facilities (The tools you will need to deliver both the revenue and the client numbers)

What we will be selling - Products once again AB not C, go narrow not wide (Think about this in terms of the future market not today’s market. Use the research phase to inform this thinking)

How we are going to generate business - Routes to market (Referrals always make for more profitable business so think of what you need in place to generate the number of new clients you need)

What we will be known for - Clear focus (How we will deliver and how our pricing will be set. For example are we going to be Emirates or Easyjet)

*see additional article for explanation of the ABC model

2. The activities which enable the company to deliver the strategy, you should get a coach to help you with this. This may be in the form of a project plan detailing a step by step set of activities and steps to achieve the outcome. What will be done in what order and by whom. Having the responsibilities clearly defined will avoid duplication of effort. An idea here is to share the plan and look for volunteers therefore spreading the workload. Projects would typically include:

Focus - creating a unique position in the market place understood and lived by all. A business with focus and clarity of its place in the market has a tendency to be commercially successful, has consistent growth and is culturally balanced. A business with focus attracts the right clients, right staff and right suppliers. Business development becomes more focussed resulting in a reduction in Sales & Marketing spend.

Sourcing - How you will find new business. Built on the back of a clear understanding of the volume and type of clients you desire.

Organisation - Structure and responsibilities. No duplication, clarity of roles leading to motivated staff.

Culture - How you will first build and maintain the desired culture. The use of all growth and not to be ignored.

Succession - How you will build a sustainability plan for the business or team to run

3. How the implementation will be measured - clear metrics that measure the interim progress on ROI, ROC and ROV

4. How the implementation will be managed - how often will the teams meet and report to owners/senior leadership team/stakeholders on progress. It’s important to remember here that the stakeholders still need to have the perception that they are in control, so regular reporting on progress is essential.

Footnote

You will have noticed that I do not recommend that you set a timescale on executing the plan. The trouble with timescales is that you will never do it sooner than the timescale you set. Often elements of the plan will be put off because that is what the plan says when you could do them sooner if the opportunity presents itself.

Finally, get help, this can be a daunting task and there are many people who can and would be prepared to help. They will find it easier if you first ask and second if you have committed some of your ideas to paper. Writing things down makes them real!!

Step 4 Implementation

The important thing to remember as you embark on implementing the plan is to expect change. No matter how much planning you have done you need to expect that something unexpected will happen so be prepared for this, accept it and move on.

As is often said “teamwork makes the dream work” and this is fundamentally correct. You have a business to run whilst all this is taking place so share the tasks, form teams and share the load. Trust your people to be with you on the journey, if they don’t buy into the vision they may well be the wrong people.

Phased implementation – Once approval and agreement has been reached with the Directors or Partners, budgets allocated, the project moves to a new phase. This phase sees the activities detailed in the plan being implemented in line with the agreed plan.

The key point here is to be patient and make sure you keep the lights on. Change can be scary for most so tread carefully and take them with you.

Step 5 Manage and Monitor

Structured monitoring of the project against the ROI – In line with the structure laid down in the plan reports will be generated by the project lead to demonstrate the cultural and commercial track of the project. This enables the partners to control direction and progress on the project.

Additionally it is important to keep all parties informed on progress against the milestones laid down in the plan. People are not mushrooms do not keep them in the dark, share your failures and share your successes.