What is strategic planning? An effective strategic planning process involves having discussions with employees and outside vendors, as well as analyzing your small business and the industry. The outcome is a formal document—the strategic plan—that details your business’s current status, its strengths and weaknesses, and the goals and objectives you want to achieve in the near future.
As a small business owner, do you regularly meet with your employees and discuss your business’s strategy for the future? Doing so can help put your small business in the best position for growth and success.
Why Do Strategic Planning?
Strategic planning provides a variety of benefits to your business. It helps your business move in the right direction to achieve your goals and objectives.
Through the strategic planning process, you and your employees will become forward-thinking. You’ll work together to agree on what the business should achieve in the future. You and your staff will detail how to meet the objectives and accomplish the goals to help the company grow and succeed. You’ll also discuss the challenges and obstacles the business will face in the future and how best to address them.
From the discussions during the planning process to the day-to-day operations, the strategic planning process should foster better teamwork and create a more productive environment at your business. By giving your employees the opportunity to contribute to strategic planning, they get a sense of accountability and will want to work together to see the business succeed.
Strategic planning also leads to a more efficient business. The plan should outline how your small business will address different situations and make decisions. For example, strategic planning could lead to an agreed-upon set of guidelines for when it makes sense for the business to purchase new equipment. The overall objective is to make sure everyone is on the same page.
Equally important is the opportunity to review and evaluate your progress. Strategic planning allows you to go back and review what you and your team are working toward. It lets you assess how your business has moved forward and if you’re on track with accomplishing your goals and objectives. If you’ve fallen off pace, strategic planning lets you make changes to get your business back on track.
What Are the Steps in Strategic Planning?
The first step in the strategic planning process can be considered as the discussions phase. Your goal is to talk with your employees, staff, and people outside of your company to get their input and opinions on your business and the industry.
Whether you do it informally or through a regularly scheduled meeting, ask your employees and staff what they think about the company. What do they think are the business’s strengths and weaknesses? For people outside of your company, such as vendors and investors, ask them about the industry in which you compete and how they think it may change in the future. They may have thoughts on an upcoming change that could pose a challenge to your business.
Conducting a Strengths, Weaknesses, Opportunities, and Threats Analysis, or SWOT Analysis—discussed in more detail below—can help you and your staff examine and analyze your business to determine its current standing. It gives you insight on how to best move forward and what kinds of goals and objectives you should work toward. When you’re talking about these aspects of your business, be truthful and candid. You need to know what is and isn’t working with your business in order to be able to make the necessary changes to fix any issues.
Don’t rush through this critical first phase of the strategic planning process. Gathering as much information as possible from a variety of sources is important. This, in turn, will help the rest of the strategic planning process, because it helps ensure the decisions you and your employees make for the business are based on facts, rather than assumptions.
What Are the Next Steps in Strategic Planning?
After you’ve gathered the information, it’s time to start developing your strategic plan.
Using the input you received, work with your employees and staff to identify what’s most important to your business. Doing this allows you and your employees to understand what direction the business is heading in and what you deem a top priority.
Figure out what factors and issues can have a large impact on your business and brainstorm ways to address them.
Determine what goals and objectives you want your business to achieve in the future. Maybe you want to increase your sales numbers by a certain percentage in the next year. Or maybe you want to grow your customer base or clientele by reaching a different demographic with your products and services.
It’s important to remember that for each goal and objective you choose, you should have an action plan. The action plans will detail how your business aims to achieve these goals. If you’re looking to increase sales, an action plan could include a marketing strategy. Be sure to include ways to measure your progress toward your goals. Whether it’s periodically checking the strategic plan or monitoring sales numbers until you reach your goal, being able to track your progress holds your small business accountable.
You’ll also need to designate the person responsible for strategic planning. Whether it’s you or another employee, the person responsible should regularly review the plan and make any necessary changes. The strategic plan isn’t a one-and-done document; it’s fluid and constantly changing. This person makes sure the business is on track to achieve its goals. If the business isn’t progressing, it’s this person’s job to make changes and communicate them with the rest of the company.
Strategic Planning Processes
There are a number of different methods you can use to help you with your strategic planning. Here are a few examples:
A SWOT Analysis will help you and your employees to think about the internal operations of your small business, as well as external factors affecting it.
Be candid and honest while conducting your SWOT Analysis. It may be easier to talk about your business’s strengths than it is to talk about its weaknesses, but it’s important to be upfront and explore what isn’t working with your business. If you don’t know what’s wrong with your business, you can’t expect to be able to fix it. And don’t feel alone; every business, no matter how successful, has issues it needs to work on.
A comprehensive and well-developed SWOT Analysis can help you create your business’s long-term strategy. By knowing what your business’s weaknesses are, you can put together goals and objectives to fix them. If you know what your strengths are, you can build upon them in the future so your business grows. And, if you know what opportunities and threats your business may be facing in the future, you put your business in a position to be proactive and efficient, rather than reactive.
Here’s an example of a SWOT analysis:
Porter’s Five-Forces Model
The Porter’s Five-Forces model, named after Harvard Business School professor Michael E. Porter, looks at five forces to analyze an industry:
- Supplier power. This examines a supplier’s impact on the cost of products and services. If there are a large number of suppliers in the industry that can provide the same products or service, then there’s not much supplier power. Suppliers have more power if there are only a few suppliers and if a company relies more on a supplier.
- Buyer power. This looks at the power a buyer, or customer, has in the industry. If your business has a small group of customers or clients, they’re viewed as having more power because they can leave and support another company.
- Competition. If a large number of companies are operating in the same industry, the less power each company has to impact the industry. That’s because there’s an equal amount of competition. If there are only a small number of companies, it gives one business more power to succeed and generate more profit.
- Threat of substitution. The uniqueness and value of a service or product you offer helps determine your strength in the industry. If a customer or client can receive the same service or product from another company at a cheaper cost, your power in the industry is weakened.
- Threat of new entry. If your business is operating in an industry where a new startup can have success in a relatively short amount of time, it could weaken your business’s status. If an industry is harder for a business to enter, it gives more power to the existing companies.
By looking at the industry through the Porter’s Five-Forces model, it’ll help you understand what your business faces externally—from both an industry and a competitor standpoint.
The Porter’s Five-Forces model builds upon the “Threats” section of a SWOT Analysis by having you analyze the different factors that can have a negative impact on your business. When you understand and identify these factors, you can start thinking about ways to address them.
A PEST Analysis looks at Political, Economic, Social, and Technological factors. Using a PEST Analysis can help you improve the efficiency of your business because you’re looking at how these different factors can affect your company.
Political factors that can impact a business include regulations or rules concerning taxes. If the corporate tax rate changes, it will affect your business. Studying political factors will help you see how much of an impact changes at the government level can have.
When you’re looking at the economic factors, you’re examining things like interest rates, exchange rates, inflation rates, and trying to determine if the economy is growing.
The social factors look at your customer base and its demographics. This is helpful if you’re trying to identify who your customers are and if it makes sense to work toward reaching a different demographic to grow your customer base.
When you’re analyzing the technological factors that can affect your business, you’re looking to see how technology can help your company. Technology is constantly evolving, so it may make sense to invest in new software or equipment in the future to help your business succeed. You also may look at automation, which can help make your business more efficient from a productivity and cost standpoint.
A PEST Analysis will look similar to a SWOT Analysis. You’ll have four squares and you’ll create a list for each category:
When you look at where your business currently is and compare it to where you want it to be in the future, the distance between those two points is considered a “gap.” Gap planning consists of developing a way to bridge that gap to get your company to the position you want it to be in.
Let’s say you want to increase your sales by 50% within the next five years. How will you do that? Answering that question is considered gap planning. It may not be a one-solution problem; you may have to do a number of different things to reach that goal.
The point of gap planning is to get you to think about the ways you can grow your company in a set amount of time.
Letting Technology Help You
There’s a variety of software available to help you with strategic planning and to create a strategic plan for your business.
The software walks you through the process of strategic planning and may even offer features to help you with reviewing and measuring your progress toward your goals and objectives.
If you’d rather do it yourself, you can use a Word document or Excel spreadsheet to help with your strategic planning. While this gives you more control over your information and what you want to do with the data you gather, it can get a little confusing. On the other hand, the available software and apps that are designed specifically for strategic planning aim to keep everything in one place and make strategic planning easier. Examples include:
- ClearPoint Strategy Strategic Planning: Helps keep all documents, notes, and data tracking in one place so you don’t have to switch between different programs. You can also create reports to share with the leaders or your employees.
- Casual.PM: An app available for smartphones and tablets. This app helps with project management and gives you and your employees an easy way to see what tasks need to be completed and the best way to finish projects.
Strategic planning takes time, but the results will help both you and your business. It’s a process that benefits businesses of all sizes and can lead to increased focus and productivity, as well as better communication among you and your employees.
In the process of strategic planning, you’ll have discussions with your staff and with people outside of the company. You’ll analyze the business to understand where it currently is and where you want it to be in the future. Whether you want to go through strategic planning manually or with the help of technology, there are a variety of analyses that can help you examine your business—and the industry you compete in—to help you make the most informed decisions. And reviewing and reassessing your strategic plan regularly will help make sure your business stays on the right track.
If you make strategic planning a priority with your business, you’ll help ensure your employees and staff understand how you want the business to succeed.
Next Steps: You’re busy. We get it. So why not let us do some work for you? By signing up for the weekly Small Biz Ahead Newsletter, you’ll receive hand-picked articles, How-Tos and videos covering the latest in small biz tools and trends. We’ll do the research while you spend your time where it counts: managing and growing your business.