This is the first of a three part article on plans and planning. The first article is to be a basic comparison of the Strategic Plan versus the Business Plan. This will give you an idea of what constitutes each type and their purpose. The second article will elaborate on the Strategic Plan more in depth and the third article will delve into the process of developing a Business Plan. I will also give you some tips on engaging an outside facilitator and what to expect from them.
Quite often the two terms, Business Plan and Strategic Plan, are used interchangeably, but they are not interchangeable to the professional. Occasionally, I find myself trying to keep from misusing the terms. An example might be the interchangeability of terms like goals and objectives and the confusion derived from their use or misuse. It is important to define terms and make sure that everyone involved is speaking the same language.
I always like to start with the strategic planning process because elements of the Strategic Plan are critical to the development of the business plan. I also like to keep it simple. It seems as though many Strategic Plan and Business Plan facilitators and consultants try to develop and draft an ultra complex document that goes beyond the understanding of all but a few. These verbose documents are expensive, complicated and generally of little use to all but the largest, most sophisticated companies with a staff of MBA's. Therefore, if the plan cannot be understood by those responsible for it execution and implementation why spend tens of thousands of dollars premium for a document that sits on your shelf in an exquisite binder? You could say that the chance for the success of a plan is directly proportional to its simplicity. A two page outline of the corporate Vision, Mission Statement, Goals and Objectives is much more effective than a three inch thick book with reams of complex, inconsequential and/or useless data.
Please notice that I used the term process when referring to planning. Planning is not an event. It takes weeks or months to develop a framework and gather the data necessary to make a viable plan. Part of the reason for the lengthy planning "process" is to check for viability and consistency through the input of key individuals within an organization. Ideas need time to ferment.
The pre-process of acquiring the necessary information is critical as well. For example, quite often projected sales data starts on the back of a cocktail napkin, jotted down by some salesperson that has neglected to get their report in on time and, furthermore, doesn't recognize the significance of his or her input. That is why I recommend that most supporting data should be generated during the Action Plan phase of the strategic plan and not before. The most logical conclusion is worthless if based on erroneous data.
The Strategic Plan is a document containing the company's Vision, Mission Statement, Goals, and Objectives over a period of time and how specific individuals within the company will achieve those Objectives within that specified time frame. The use for a "Strategic Plan" is to determine your limited resources (time, money, people, equipment, materials, technology, and facilities), evaluate those resources, then for management to get everyone on the same course such that their actions are coordinated to achieve each Objective within the resource limitations. It is an internal document to be used routinely as a roadmap for your employees, on a timely basis, to achieve success. The format is generally as follows:
The above format is pretty basic, but will vary depending on the interpretation of the elements of the plan. For example, the Mission Statement can vary depending on interpretation. I generally like to include the values of the company in regards to its stakeholders (customers, employees, vendors, shareholders, board) and some explicit definition of what business the company would like to be in.
The definition of terms is also critical. For example, Goals are enduring statements of what the company is striving for concerning the medium to longer term view. "Increased market share" would be a goal. Objectives are statements or desires that include a time frame and an amount; they should be consistent with the Goal. "We want to increase our market share by 10% in the year 2005" is an Objective consistent with that Goal.
I have developed hundreds of Strategic Plans for companies I was responsible for as well as for clients. The main fallacies that I see are:
Finally, the Strategic Plan is a living, dynamic document that is flexible, takes into account changes and acts as an almost daily guide to running a business.
The Business Plan is a statement about your business that follows a distinct format that will be used to evaluate the business you are in and what you choose to do with your business in the future. The use for a "Business Plan" is to demonstrate to outsiders what your business is all about. The basic format is as follows:
The above format is basic and can be modified depending on:
The bottom line is that the first thing that your audience will want to see, especially if they are asked to take a vested interest in your company, is your business plan. NO ONE WILL RISK THEIR CAPITAL WITHOUT EVALUATING SOME TYPE OF VIABLE BUSINESS PLAN. (Unless you have enough credit and assets to basically underwrite the amount of money on your own)You will be judged by the reader by your logic, clarity, completeness, simplicity, consistency, grammar, punctuation, spelling, and your ability to demonstrate your uniqueness. Your audience will be looking for a specific format with a compelling executive summary. They will want to know that you know what you are doing, where you are going, how you will get there and, most importantly, how and when they will get paid back.
I read and review dozens of business plans every month and find that most are very poorly written. The most common flaws in the written proposal are:
All in all, I highly recommend that a seasoned professional be involved in both processes. When I was President and CEO of AKZO Nobel Coating in North America with eight divisions, I was the facilitator for the each of the divisional plans, but I always enlisted the help of an outside professional to facilitate our North American corporate plan to ensure objectivity, keep us focused, and to keep my views from over riding those of the management team.
Remember: The effectiveness of any plan is in its simplicity. The key is to reduce the complexities of your business into a written form that anyone can read and understand.
In the next two articles we will focus on the Strategic Plan itself in much more detail and then on the Business Plan. We will also discuss what you should look for from an outside advisor in regard to developing your plan.
|Charles "Chip" Brethen is a business man experienced in consulting businesses. He has been President and CEO of six companies ranging from $20+ million to over $500+ million, and is currently a Managing Director and a Principal for Stonehurst Capital Advisors - A Merchant Bank in the Midwest.|