The following article was first published in the Insights section of Whittlesey website. It is reposted here with permission.
Picture this: you’re about to go on a road trip with a friend.
You and your friend get in your car and start driving.
After a while, your friend asks you how much longer until you arrive. You say you don’t know.
Your friend asks you which route you are taking. You say you don’t know.
Your friend even asks you if you know where you are going. You say you don’t know.
Eventually you run out of gas because you weren’t sure if you needed more gas to get where you were going.
Why do you need a business plan
Now imagine running a small business like that doomed road trip – not knowing where you’re going, how to get there, or what you need to get there.
This is exactly what small business owners do without a solid business plan.
Many small business owners suffer from the following symptoms, which create significant obstacles to business growth and sustainability.
This article will identify symptoms associated with failed engagement in the strategic planning process and demonstrate how strategic planning can address these common issues.
The lack of a solid business plan can lead to all sorts of problems that can hinder the growth and success of a business.
Those listed below are just a few:
- Inconsistent results. Results in any given month, whether good or bad, are not necessarily predictive of future results because the company has failed to systematize its best practices.
- Put out the fires, go different directions. The business owner navigates each day reactively rather than proactively because the business lacks a strategic system for prioritizing value-producing activities to achieve predetermined results.
- Personally overwhelmed. The business owner feels personally overwhelmed because the business runs the owner rather than the owner running the business. This happens because the business owner does not have a strategic plan to maximize the quality of his business and the quality of his life.
- The team is not on the same page. The business owner is not achieving maximum profitability because the business team is not operating at maximum productivity due to leadership, skill, or relationship issues and deficiencies.
- No goals and objectives to guide behavior. The business owner cannot clearly articulate his short, medium, and long-term goals and objectives, so he cannot assess whether his current behaviors will lead to the achievement of his ultimate goals and objectives.
- No clear definition of success. The business owner has not defined success in his business and personal life, so he is constantly looking to achieve more instead of establishing clear goals and metrics that will help define and recognize success progressive as they approach their ultimate goals. .
- Team members occupy mismatched roles. The business owner does not have team members whose roles are well defined and match their skills. As a result, the team does not operate at maximum productivity and the business does not operate at maximum profitability.
- Time management, always late. The business owner always feels like they are behind because they work in a reactive mode rather than a proactive strategic mode that identifies core strategic needs and aligns behavior accordingly.
- Confusion about important business decisions. The business owner finds it difficult to weigh and evaluate competing alternatives because they cannot easily identify how risk and reward considerations fit into their overall goals and objectives.
The cure for these ills is good strategic business planning that establishes where the business owner is now, where they are going, and how the business owner will move from the current state to the desired future state.
The action plan that lays out how a business owner moves from the current state to the desired future state represents the strategic plan of the business.
- Identifies the core strength of the business. The profits of the business become more constant and the transfer or sale value of the business increases.
- Creates a proactive work environment. The business owner’s day-to-day activities focus on areas that will increase the operational efficiency and profits of the business.
- Defines the actions necessary for professional and personal success. The business owner will not be overwhelmed with superfluous activities that will not affect the basic definition of professional and personal success.
- Identifies gaps in leadership, skills, or relationships and creates action plans to close those gaps and increase productivity. The business owner is able to enjoy the increased profits resulting from closing these drains on productivity.
- Articulate short, medium and long term goals. The business owner is able to assess whether their current journey and the resulting metrics indicate the achievement of their long-term goals.
- Defines success. The business owner is able to establish a clear vision of their path to success and the measures of that success.
- Identify key employees. The business owner is able to align their roles in a way that maximizes the productivity of the business and thrives on the substantial increases in productivity.
A solid strategic business plan eliminates the confusion surrounding important business decisions because the business owner is able to measure the risks and rewards against a clearly defined vision of success.
Therefore, the business owner does not need to agonize over competing paths that may or may not align with their business goals.
When driving a small business, have a plan: know the destination and how to get there.
About the Author: Brian Kerrigan is a partner in the Whittlesey office in Hartford. He has provided tax compliance and advisory services to businesses across New England for over a decade. Connect with Kerrigan by email for more information.