For many business owners, projecting what is going to happen next month is so difficult that forecasting what is going to happen over the next five to ten years seems ludicrous, impossible even. But the strategic plan is not like the budgeting process, which is very quantitative where you really have to care about the numbers.
The strategic plan is more of a qualitative exercise. It is designed to get people talking about their long-term plans for the company and be a discussion about the business that owners don’t usually have time for during day to day operations.
The strategic plan has 3 main benefits to the business owner. It sets the direction for the future of the company, establishes a long-term “what if” scenario exercise, and can serve as a personal financial review for the business owner. These are the functions of a well-run strategic planning process.
1. This plan is a vision for the future of the company
It sets a comprehensive set of goals for the company to achieve over the next three to five years. It asks questions like:
“Where do we want to take the business?
“How do we want to improve?”
These are high-level, company-wide goals that the business wants to achieve. Sometimes figuring out those goals can take a long conversation. For example, if a multi-generational family is running a business, there may be some disagreement about where each owner wants to take the company. Perhaps the parents are content in where the business stands, but the children want to expand the business and take it in a new direction. Those opinions have to be shared so all the owners can agree on long terms so everyone can work together to achieve them.
This is not the stage where the business starts charting out how much money they want to make in the upcoming years. This is goal planning. However, the budget for each year should be in line with the strategic plan so the company can start on its journey to the road of success.
2. Plan for the impact different scenarios will have on the business
Strategic Planning allows the company to plan for long terms “what if” scenarios and what kind of impact those scenarios will have on the business
For example, what will happen if the cost of real estate in the business’s locations continues to increase over the next five years? How will that impact the company?
By planning out for long term what-if scenarios, business owners can mitigate risk and identify opportunities to protect and expand the business.
3. The Strategic Plan also can act as a personal financial review for the owner
Because the majority of a business owner’s net worth is wrapped up in their business, it is hard to see where they are standing in the terms of success. When can they retire? What’s their net worth? And that can make it hard to plan for the future of business owner.
The strategic plan can begin to sketch out how much money the owner will make over the next few years. It will not be a perfect projection, but it does open up the conversation and makes planning for the future less frightening.
Making big, overarching, long-term plans for the future of the company can be tough. The strategic plan can help with that. It allows the owners to sit down and plan out where they want to take the business, how they can plan for different scenarios, both positive and negative, that may come up in the future, and helps the owners judge what their net worth it and how they can plan their own future as part of that process.