Where is your business now and where do you want it to be in the new year? With the year drawing to a close, it’s essential to take a strategic approach to business growth and consider how you plan to put your vision into action to achieve your business goals.
At Addition Financial, we often discuss future plans with our business members. One of the topics that has come up frequently is how and when to create a strategic business plan — and how a strategic plan differs from a traditional business plan. Here’s what you need to know.
A strategic business plan has a different role in the life of a business than a traditional business plan. While a traditional business plan establishes the structure of a business in its early stages, a strategic business plan is more appropriate for an established business.
The purpose of a strategic business plan is to lay out the road ahead for a business, usually over a period of three to five years. It provides focus and direction to help a company achieve its growth goals.
With a strategic plan, you can optimize the use of your resources to fuel business growth, including how you use cash and human resources. It may also be useful for presenting your projections to shareholders if you have them. By contrast, a business plan can help you obtain funding to start your business or pay your overhead expenses.
Ultimately, your strategic business plan should spell out your growth goals and explain how you will reach them. It’s the key to building and sustaining a long-term competitive advantage that will take your company to the next stage of its development.
When you create a strategic business plan, it’s essential to understand what goes into it. There are three main components that get broken down into smaller parts, so let’s start with the three components.
The first key component of a strategic business plan is a two-parter that includes your company’s vision statement and its mission statement. Your vision should provide a big picture insight into what you hope to achieve — a best case scenario for your company. For example, Patagonia’s vision statement is “We’re in business to save our home planet.” A lofty goal, for sure, but one that illustrates Patagonia’s purpose.
The mission statement should be more specific, spelling out some of the ways you plan to turn your vision into a reality. Let’s use Patagonia again. Here’s their mission statement:
“Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”
As you can see, the company’s mission statement adds some necessary meat to the bones of their vision statement. It lets customers know that Patagonia is working hard to build a sustainable and environmentally friendly business.
The next key component of your strategic business plan is your business goals and objectives. Each goal should be a SMART goal (that’s Specific, Measurable, Attainable, Relevant & Time-Bound) because you need to be able to track your progress toward each specific objective you include.
Many of the goals you include in your strategic plan will be short-term goals but some will be long-term goals. You’ll need to make sure that your goals are realistic because failure to do so can mean that your strategies won’t work.
Finally, your strategic business plan should include the specific actions you will take to pursue your goals and objectives and a scorecard for tracking them.
The scorecard should include one or more metrics that you’ll use to measure your progress. For example, if you wanted to focus on moving into a new demographic, you would include an analysis of your existing demographics and a target number for the new demographic. If you wanted to improve your customer retention rate, you would include your current CRR and your target, and track your progress by recalculating your CRR at intervals.
Whether you have created a strategic business plan in the past and want to revamp it or this is your first attempt to build one, here are the steps to follow.
Strategic planning requires a situation analysis that takes into account your current business status to help you plan the road ahead. It must include an internal analysis that incorporates human resources and capabilities, technological resources and financial resources.
Your situation analysis should also include examination of external factors that may impact your business, including micro and macro factors that include competitors, the economic environment and demographics.
Analyzing your strengths, weaknesses, opportunities and threats (SWOT) is the next step in the strategic business planning process. Here again, you’ll need to examine internal and external factors.
Your strengths and weaknesses are internal and as a result, mostly under your control. You might include strong brand awareness and an experienced team as strengths and inconsistent cash flow as a weakness.
Opportunities and threats typically come from outside and are often beyond your control. Opportunities might include a high demand for your products or services, while threats might include competitors who charge less or a looming recession.
Even if you have researched your competitors previously, you’ll need to examine the competitive environment and your competitors’ resources to build your strategic business plan.
It’s essential to take direct competitors into consideration, of course, but you may also need to think about alternatives that are available to consumers. For example, in the hotel industry, competitors include hotels and motels, but they may also include Airbnbs, bed & breakfast establishments and VRBOs.
Said another way, you’ll need to think about existing competitors, potential new entrants into the market, and the buying and selling power of consumers when you do your competitive analysis.
There are a number of environmental factors that are beyond your control but must be incorporated into your strategic planning. These include the following:
For example, if you were thinking about expanding into a new country, you would need to understand that country’s politics and legal requirements, as well as the state of its economy. You’d also need to consider the logistical challenges of shipping products, which might include both an understanding of technology and the availability of fuel (and its cost) to get your products to their destination.
With your research and analysis in hand, you can now begin to set strategic objectives for your business. You’ll need to make notes of any available resources or limitations that may impact the business goals you set.
Each objective should be specific. Saying that you want to increase profits is not specific, but an objective to increase your first quarter profits by 5% and your annual profits by 10% is specific and attainable.
After you set objectives, you’ll need to be clear about what you need to pursue your objectives. For example, you might need two new salespeople to reach your sales goal.
Related resources include the money to hire and train those new employees plus additional ongoing funds for payroll. You may also need technology to support an expanded sales team and money on hand to reimburse team members for travel and entertainment.
At this stage, it’s time to have some fun by using everything you’ve learned to brainstorm strategies to meet your objectives.
We suggest bringing in people from different areas of your company to help with the process and encouraging a free flow of ideas. Then, you can compare your options and choose the strategies that you think are most likely to work.
Strategies don’t typically include a lot of detail. After you’ve chosen one or more strategies to try, the next step is to create a specific action plan for each one.
Break down each business strategy into concrete steps that you’ll carry out to implement the strategy. Keeping the steps small in scope will help you adapt if a business strategy isn’t working the way you thought it would. Make sure to include the metrics you’ll use to track your progress.
The final step is to analyze your data, calculate key metrics and understand which strategies are working and which aren’t. If you already have a strategic business plan, the end of the year is a good time to evaluate it and revamp it as needed.
Now, let’s look at a basic template for what your strategic business plan might look like. This strategic plan example features a company-wide view of strategy and would need to be supported by detailed analysis and department- and employee-specific action plans.
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Vision Statement |
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Mission Statement |
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Available Resources |
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SWOT Analysis |
Strengths |
Weaknesses |
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Opportunities |
Threats |
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Key Competitors |
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Environmental Factors |
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Objective #1 |
Goal |
Strategy |
Timeframe |
KPIs |
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Objective #2 |
Goal |
Strategy |
Timeframe |
KPIs |
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Objective #3 |
Goal |
Strategy |
Timeframe |
KPIs |
Supporting documentation should take each strategic goal and break it down into action items, together with an analysis of necessary resources.
As the new year approaches, your company should review its existing strategic plan and revamp it as needed. If you don’t yet have a strategic plan, then this is the perfect time to build one to help you articulate and pursue your most important growth goals.
Do you need financial assistance to grow your company? Addition Financial is here to help! Click here to read about our small business loans and start the application process today.