Building a Strategic Plan

Running a small-to-medium sized (SME) or family-owned business today means you are faced with an often overwhelming array of daily challenges…challenges that can take your focus away from the future, because you’re simply trying to get by today. That’s why a business review or preparation of a strategic plan is a virtual necessity. This may not be a recipe for success, but without it a business is much more likely to fail. A sound plan should:

  1. Serve as a framework for decisions or for securing support/approval.
  2. Provide a basis for more detailed planning.
  3. Explain the business to others in order to inform, motivate & involve.
  4. Assist benchmarking & performance monitoring.
  5. Stimulate change and become building block for next plan.

A strategic plan should not be confused with a business plan. The former is likely to be a (very) short document whereas a business plan is usually a much more substantial and detailed document. A strategic plan can provide the foundation and frame work for a business plan.

Michael Gerber in The E-Myth Revisited observes, “ Your Business Strategy and Plan (Strategic Plan) is a way of communicating to everyone you must communicate to the direction your business is going, how it intends to get there, and the specific benchmarks it will need to hit in order for the Strategy and Plan to work.”

A satisfactory strategic plan must be realistic and attainable so as to allow managers and entrepreneurs to think strategically and act operationally.

Basic Approach to Strategic Planning

A critical review of past performance by the owners and management of a business and the preparation of a plan beyond normal budgetary horizons require a certain attitude of mind and predisposition. Some essential points which should to be observed during the review and planning process include the following:

  • Relate to the medium term (i.e. 2-4 years)
  • Be undertaken by owners/directors
  • Focus on matters of strategic importance
  • Be separated from day-to-day work
  • Be realistic, detached and critical
  • Distinguish between cause and effect
  • Be reviewed periodically
  • Be written down.

As the precursor to developing a strategic plan, it is desirable to clearly identify the current status, objectives and strategies of an existing business or the latest thinking in respect of a new venture. Correctly defined, these can be used as the basis for a critical examination to probe existing or perceived Strengths, Weaknesses, Threats and Opportunities. This then leads to strategy development covering the following issues discussed in more detail below:

  • Purpose
  • Vision
  • Values
  • Critical Success Factors
  • Strategies
  • Goals
  • Projects

Key Steps towards developing a Strategic Plan

The preparation of a strategic plan is a multi-step process covering purpose, vision, values, critical success factors, strategies, goals and projects. These are discussed below.

The Purpose

The first step is to determine or clarify your Purpose. Jim Collins, in Built to Last, identifies “focus on Purpose” as a major element found in all the successful visionary companies he studied. He states that purpose is the set of fundamental reasons for a company’s existence beyond just making money. Purpose need not be wholly unique…rather its role is to guide and inspire…not necessarily differentiate. 

The Vision

The next step is to develop a realistic Vision for the business. This should be presented as a pen picture of the business in five to seven years time in terms of its likely physical appearance, size, activities etc. Vision answers the question, “Where are we going?” It is the picture of the end result…something you can actually see…not vague. Focus on what you want…not what you want to get rid of.

The Values

The third element is to address the Values governing the operation of the business and its conduct or relationships with society at large, customers, suppliers, employees, local community and other stakeholders. Values answer the questions “What do we want to live by?” and “How?” They need to be clearly described, so you know exactly the behaviors that demonstrate that the value is being lived.

The  Critical Success Factors

The next key element is to explicitly state the business’s Critical Success Factors in terms of the results it needs/wants to achieve in the medium/long term. Aside from presumably indicating a necessity to achieve regular profits (expressed as return on shareholders’ funds), the factors should relate to the expectations and requirements of all the major stakeholders, including employees, and should reflect your purpose for running the business. These factors could cover growth, profitability, technology, offerings and markets.

The Strategies

Next are the Strategies – the rules and guidelines by which your purpose, vision, etc. may be achieved. They can cover the business as a whole including such matters as diversification, organic growth, or acquisition plans, or they can relate to primary matters in key functional areas, for example:

  • The company’s internal cash flow will fund all future growth.
  • New products will progressively replace existing ones over the next 3 years.
  • All assembly work will be contracted out to lower the company’s break-even point.

Use SWOTs to help identify possible strategies by building on strengths, resolving weaknesses, exploiting opportunities and avoiding threats.

The Goals

Next come the Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company’s critical success factors, for example, to achieve sales of $3m in three years time. Goals should be quantifiable, consistent, realistic and achievable. They can relate to factors like market (sizes and shares), products, finances, profitability, utilization, efficiency.

The Projects

The final elements are the Projects which set out the implementation plans for the key strategies and goals. These should cover resources, objectives, time-scales, deadlines, budgets and performance targets.

It goes without saying that the purpose, vision, values, critical success factors, strategies and goals must be inter-linked and consistent with each other. This is much easier said than done because many businesses which are set up with the clear objective of making their owners wealthy often lack strategies, realistic goals or concise success factors.

Here is a great One-page template free download for your planning:


About Don James, CPA/PFS, CFP
Don is the Tax & Financial Planning partner with Kiplinger & Co., CPAs headquartered in sunny Cleveland, Ohio since 1982. He partners with business owners and families and specializes in goal achievement solutions, tax minimization strategies and serves in the role of gatekeeper of sound financial advice.

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