If Your Firm Is Ready for Change, Consider Strategic Planning
You may think you’ve planned sufficiently if you have a business plan, but you need even more. Developing a strategic plan will give you an overview of your company, its environment and its long-term goals.
“A strategic plan is the big picture from 30,000 feet and a business plan is on the ground,” said Debra Esparza, owner of Esparza & Associates, a Long Beach small-business consulting firm. “But they go together because a business plan is often used to put the strategic plan in action.”
A business plan is typically a one-year operating plan that focuses on short-term goals, Esparza said. A strategic plan is a three- to five-year overview that envisions what your business will look like in the future and how you’re going to get there.
If your company is at least 3 years old and has a foothold in its market, you should begin thinking about a strategic plan if you want to grow, enter a new market or introduce new products.
Strategic planning is not for every business, Esparza said. You probably don’t need it if you are satisfied that your business is stable and yielding a satisfactory living for you and your family. “It’s a lifestyle question,” Esparza said.
If you do decide to create a strategic plan, a variety of planning techniques and systems exist to help. A basic outline should contain the following:
* Vision or mission statement: To embark on a strategic plan, you need to brainstorm with key people from your company, such as advisors or board members, management staff, employees, customers and vendors--six to a dozen in all.
“You’re looking to bring people together that might not interact in a day-to-day business, but in a strategic planning session they can bring insights and expertise to bear or see new opportunities you may not have even thought of,” Esparza said.
An off-site location is best in order to avoid interruptions. Many companies hire professional facilitators to break the ice, lead exercises to spur creativity and keep track of ideas. Whether or not you use a facilitator, you begin by creating a mission, purpose or goal for the company or updating the existing one.
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A mission statement is usually two to four sentences that describe the reason for your company’s existence. It includes what you want to achieve in the long run and with whom: the target group or company stakeholders. Modified only at long intervals, it helps direct the company during difficult decisions.
* Stakeholder value: Next, you need to identify who has a stake in your company’s future--who may be affected by the strategic decisions you make, such as customers, employees, advisors, directors, financial partners, community members, other businesses, vendors, suppliers, competitors and owners. They should be categorized into two groups--those inside the company and those outside--and what they have at stake should be defined.
* SWOT analysis: The next step is to assess your firm’s external and internal environment in order to identify strengths, weaknesses, opportunities and threats that may affect your company. Commonly called a SWOT analysis in business schools, the process is simply a way to assess variables related to your business. They include internal company strengths and weaknesses as well as opportunities and threats that come from outside the company.
Internal strengths include resources (time, people and money; your plant and equipment; and your company’s knowledge and technology) or unique company features that help your firm accomplish its mission. Internal weaknesses are deficiencies that hinder you from accomplishing your mission.
For example, one of your company’s strengths could be a highly qualified and experienced management team. A weakness could be that the team is getting older and nearing retirement. Another strength could be an intranet that allows you to communicate with all your business partners, but a weakness could be that the intranet is not Y2K compatible.
External opportunities are outside factors or situations that can benefit your company, and external threats are outside forces that can harm your company. Fierce competitors, tight money, export tariffs and industry shortages could be external threats. New market niches for expansion or additional alliances that can bring in new business or money are external opportunities.
* Priorities: Once a SWOT analysis is compiled, your group begins working on the heart of the strategic plan: development of strategic issues. You will use all the listed SWOT elements, prioritize them and figure out how they fit into your company’s mission. How you go about prioritizing depends on the pressures in your business, Esparza said.
You might decide to focus on a weakness that is harming your business now or could in the future, or you could focus on opportunities for growth and how to get there.
“What often happens in this process is you realize you can’t get where you want to go because you’re missing a key resource,” Esparza said.
Once you identify missing key resources, you can adjust your business plan--the day-to-day operating plan--to acquire those resources.
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Don’t forget how your stakeholders will be affected by your decisions. For example, if you could increase sales by manufacturing a cheaper version of your high-end product, you must account for the effect on customers who depend on your quality products.
Finally, the financial bottom line must be considered. You may see an opportunity to expand that will please all your stakeholders but may fail to meet your expected profit earnings.
* Action steps: The final step in strategic planning is to devise a plan of action that considers the SWOT elements and the stakeholders and meets your priorities and financial concerns in order to bring you closer to the company’s vision or mission.
The strategic planning process might take a couple of meetings a couple of weeks apart. If done correctly, it develops from within the company in an almost organic way, Esparza said, and is a basic tool to grow your business. Other growth tools include the strategic use of alliances, technology and human resources.
Even if you don’t want to grow, you may need strategic planning to anticipate and cope with trends so you can stay afloat in a changing economy.
Strategic planning is all about change.
“If you don’t want any changes, then you don’t have to do this,” Esparza said. “If you like the way your business is running now and you don’t want to take the time to consider new ideas, then you can skip over this process and go on until it’s time to close your business.”
Exercise: Set aside time to determine if your business is ready for strategic planning and if growth and change is something you want to embrace or need to do to remain in business.
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Entrepreneurship 101
Chapter 5: HOW TO GROW YOUR BUSINESS
* Devising a Strategic Plan
* Making Alliances
* Using Technology
* Using Human Resources
* Forming an Exit Strategy
The Bottom Line
“Entrepreneurship 101” is a tutorial on how to choose, start, finance, plan and grow a business. The program, written by Times staff writer Vicki Torres, was developed by Debra Esparza, a faculty member at the Entrepreneur Program of USC’s Marshall School of Business and former head of USC’s Business Expansion Network. BEN is a community and economic development project that has counseled more than 5,000 small-business owners in the Los Angeles area over the last six years. BEN provides help with financing, business planning, accounting, marketing and other issues. The tutorial can also be found on The Times’ Small Business Web site at https://www.latimes.com/smallbiz.
