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Home > Tools and Resources > Running a Business > The Business Plan versus the Strategic Plan - Part 2

The Business Plan versus the Strategic Plan - Part 2

By Charles A. "Chip" Brethen | Stonehurst Capital Advisors, Inc
Contact Charles A. "Chip" Brethen | Visit Website | About The Author

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Part Two: The Strategic Plan

Before we launch into part 2 of the three part series on Strategic Planning versus Business Planning I would like to reiterate the difference between the two.

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 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.

A subset of the Business Plan is what I call "The Corporate Summary". This document is not meant to be a definitive plan, but an abbreviated informational piece in the form of a compelling argument to entice potential investors. They would them determine if they wished to delve deeper into the catacombs of the company to determine, through the due diligence process, if they would like to invest or risk capital.

The Business Plan will be more totally explored in the third article.

Exploring the Strategic Plan:

I often start my programs out by putting up the following saying. I don't remember where I first heard it, but it is apropos to so many organizations. At least the comment always evokes a more than casual response.

We the willing, led by the unknowing, have done so much, for so long, with so little, are now qualified to do anything with nothing, IMMEDIATELY!

Let's start by determining why we might need a Strategic Plan:

The Strategic Plan is critical to success, especially in a down market or a highly competitive sales/marketing environment. Too often companies operate without a well thought out, written strategic (operational) plan. Your plan, properly formulated and implemented, ensures that everyone is taking the same course of action, working together, executing the same strategy to achieve your company's "Vision".

The Plan will allow you:

  1. To control costs
  2. To increase margins
  3. To facilitate growth
  4. To be ready to survive the next economic downturn
  5. To determine if the resources are available to do what is needed
  6. To compete in a competitive marketplace
  7. To impress potential investors
  8. To keep current lenders appraised of company's development
  9. To use it as a tool to help sell, merge or buy a business
  10. To facilitate the formation of strategic alliances
  11. To use it as a recruitment tool for key executives
  12. To use parts of it for public relations and marketplace credibility
  13. To use as the basis for a Business Plan

Does a plan pay?

Yes! Assuming that top management provides the resources, endorses and participates in the development and implementation of the plan. And, provided that:

  1. There are standards for measurement that are meaningful and measurable. Then, in case of a negative deviation, corrective action will be initiated.
  2. Problem areas that are uncovered by the formation of the plan are addressed in a timely and efficacious fashion.
  3. The agreed upon program is implemented and monitored on a regularly scheduled basis.
  4. There is an incentive program in place to encourage compliance.
  5. When internal and external factors (assumptions) change there is a corresponding modification in the plan to account for the different set circumstances that now exist.
  6. When a major unforeseen event or opportunity arises that the plan is revisited to allow for that.

Who should be involved?

What should you expect from your management team?

How long should the process take?

The process will take weeks if not months the first time around. Notice I said "process". Strategic Planning is not an event, but a series of encounters between key people. They need to think about the issues and take time to formulate their own opinions. A consensus will be reached once the Vision is understood. If the planning process is properly organized then 2 to 3 months is realistic for the first attempt. This assumes that some time is scheduled away from the office in a remote location to limit phone calls and day to day interruptions.

Strategic Process: Phase 1

The first phase is to do a better job of what you are currently doing. Get a solid base. I always say, "It's hard to take a jet fighter off of a sand runway". Get the management team familiar with the process. Identify and address major problem areas. This is necessary before becoming proactive in determining the direction that you would like to take. A simple building block approach to strategic planning is recommended to keep the elements simple, understandable and executable. It's difficult to properly execute what you don't understand.

The factors that make you unique and successful are determined. An analysis is done to determine where you are and how your company stands. Forms are filled out on a variety of areas such as a SWOT (Strength, Weakness, Opportunity, Threat) analysis. The areas of greatest concern to success are explored. It is also the time to take an inventory of your resources. That is your time, money, facilities, people, technology, equipment and any other resources that you have that are pertinent to your business.

You should get a consensus on the business you are in and develop a model of where you think the market is going to be. Look at the products and/or services you have to offer. And then develop a statement on the business you would like to be in. This is not necessarily the business you are currently in.

Next, have each participant evaluate the company and its place in the market so that it can be compared to the views of top management. It is always interesting to compare those viewpoints.

Now it's time to develop and solidify a "Vision". The Vision states where the company sees itself in 5 to 8 years from now. You want to ensure that everyone is taking the same course of action, using the same methodology for implementation, using an agreed upon, clear, concise and explicit strategy, toward a common end point.

A "Mission Statement" statement is developed. Mission Statements vary in their content from company to company. I like to use the Mission Statement to do the following:

  1. State the business you would like to be in concisely and completely.
  2. Express your values and attitude toward your stakeholders.
    1. Employees
    2. Customers
    3. Vendors
    4. The community in which you operate
  3. Your overall characteristics that you would like your company to have such as family, professional, dedicated, etc.

Next is the establishment of Goals and then the Objectives for those goals. Also, Issues are sorted out from Goals to prevent confusion. Goals are ongoing and what we strive for long term. Thus they have neither a time frame nor an amount. "Increase market share in our consumer products line" could be considered a Goal.

An Objective is a subset of a Goal and should include a time frame and an amount. "Achieve an 18% market share in foot care products by the end of 2005" could be considered an Objective consistent with the Goal. Generally, three to five Goals is sufficient and three to five Objectives for each Goal is about as much as one can handle the first time around.

An "Action Plan" is next established for each Objective. That is, a chart of who does what, and by when, to accomplish the Objective. This part of the plan will determine the data necessary to be generated to fulfill your Action Plan. Too often strategic planners require extensive data before starting the process, but I find this to be distracting and a waste of energy. The data is often erroneous and not germane to the plan.

A Risk Analysis for both internal and external factors of your business should be developed and then those risks should be evaluated. If necessary, form a Contingency Plan for the high risk items that, if they occur, are deemed to have a high impact on the company.

A basic Forecast and Budget are generated to act as a guideline to your progress. These figures should be consistent with the written plan above. This is also the time to see if your grandiose plans above are financially feasible. Often it is back to the drawing board at this point to see if your can be more realistic in your expectations.

The direction of Phase 2 is determined by the results of Phase 1.

The Process: Phase 2

Reviewing the appropriateness of Phase 1 and making the proper adjustments is important. Once you are satisfied with Phase 1, you are ready to approach the second phase. This is the part of the plan designed to determine the direction in which you would like to go in view of the market and the competition. You will also get a feel for how far you can take the company in that direction. This is accomplished by comparing your company to others by a variety of criteria and evaluating your product/service to theirs and the market's needs.

Your product lines are evaluated and the market segments you serve are determined.

While each plan is different because each company is unique, this is the basic process. Again, I always like to keep it simple.

Do I need a planning group and/or a consultant?

The secret is to execute, monitor and modify the process without adding to excessive bureaucracy and overhead. The responsibility should not be a dumping ground for a part timer, the less competent, or an extraneous, old time manager. If you do not have the internal resources to protect your investment, the use of a consultant on an as needed basis is recommended.

  1. Make sure planning process is continued and not forgotten
  2. Initiate update meetings as necessary for progress, monitoring results, checking the validity of assumptions and making modifications
  3. Make sure necessary data is generated, in a useable format and germane
  4. Make sure written plans are operationally useable and updated as necessary
  5. Evaluate and act on opportunities as they occur
  6. Analyze external conditions that will impact on plan and modify plans accordingly - flexibility!

Why use an outside facilitator?

  1. Objectivity. It is not necessarily an advantage to know the client's business in depth. In fact, an often greater and more varied experienced facilitator can provide expanded and alternative view points. However, while a facilitator may provide insight, they are not magical solutions for what a company "ought" to do
  2. Present, define and focus on the process through clarification, redirection and summary.
  3. Keep the management pecking order from skewing the process by encouraging reticent participants and tempering those who tend to dominate. Also, by keeping the CEO in involved, supportive, but not allowing the CEO to dominate.
  4. Act as a sounding board for way out ideas
  5. Be available to assist with the integration of the plan as needed
  6. Keep the process and the plan digestible
  7. Minimize interruptions
  8. Be there as a conduit to CEO for other key players
  9. Question the sacrosanct and, heretofore, unchallenged

Remember, the development of your written plan is the process by which you map out how you are going to achieve your future. It is a way of evaluating your limited resources and deploying those resources in the most efficient method. That is, you will have a better chance of having everyone in the organization going in the same direction toward a common, agreed upon Vision.

Part three of this series will explore in depth more about the Business Plan and how the Strategic Plan becomes the basis for much of that plan.

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About The Author
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.

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