The following article first appeared in the Insights section of Whittlesey’s website. It is reposted here with permission.
Imagine this: You’re about to take a road trip with a friend.
You and your friend get in your car and start driving.
After a while, your friend asks how much longer until you arrive. You say you don’t know.
Your friend asks what route you’re taking. You say you don’t know.
Your friend asks if you even know where you’re going. You say you don’t know.
Eventually, you run out of gas because you had no idea if you needed to get more gas to get wherever it was you were going.
Why You Need a Business Plan
Now, imagine running a small business the same way as that doomed road trip—not knowing where you’re going, how to get there, or what you need to get there.
Small business owners without a sound business plan are doing just that.
Many small business owners suffer from the following symptoms which create intense barriers to business growth and viability.
This piece will identify the symptoms associated with failure to engage in the strategic planning process and demonstrate how strategic planning can solve these common issues.
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The lack of a sound business plan can lead to all sorts of issues that can hinder the growth and success of a business.
The ones listed below are just a few:
- Inconsistent results. The results in a particular month, whether good or bad, are not necessarily predictive of future results because the business has failed to systematize its best practices.
- Putting out fires, going in different directions. The business owner navigates each day in a reactive rather than proactive manner because the business does not have a strategic system for prioritizing value-producing activities to achieve predetermined results.
- Personally overwhelmed. The business owner feels personally overwhelmed because the business is running the owner as opposed to the owner running the business. This occurs because the business owner does not have a strategic plan to maximize the quality of their business and the quality of their life.
- Team is not on the same page. The business owner is not realizing maximum profitability because the business team is not functioning at maximum productivity due to leadership, skill or relationship issues and gaps.
- No goals and objectives to guide behavior. The business owner cannot clearly articulate their short-term, medium-term, and long-term goals and objectives so they cannot assess whether their current behaviors will lead to the achievement of their ultimate goals and objectives.
- No clear definition of success. The business owner has not defined success for their business and their personal life so they are constantly in a state of seeking to achieve more as opposed to establishing clear goals and metrics that will help define and recognize incremental successes as they move closer to their ultimate goals.
- Team members are in roles that do not fit. The business owner does not have team members with roles that are well defined and fit their skillset. As a result, the team is not functioning at maximum productivity and the business is not functioning at maximum profitability.
- Time management, always behind. The business owner always feels like they are behind because they are working in a reactive mode rather than a proactive strategic mode that identifies core strategic needs and aligns behavior accordingly.
- Confusion regarding important corporate decisions. The business owner has difficulty weighing and evaluating competing alternatives because they cannot easily identity how the risk and reward considerations fit into their overall goals and objectives.
The cure for these ailments is sound strategic business planning that establishes where the business owner is now, where the business owner is going, and how the business owner is going to get from the present state to the desired future state.
The action plan that establishes how a business owner moves from the present state to the desired future state represents the strategic plan for the business.
- Identifies the core strength of the business. The profits of the business become more consistent and the transfer or sale value of the business increases.
- Creates a proactive work environment. The business owner’s daily activities focus on areas that will increase the operational efficiency and profits of the business.
- Defines the actions necessary for business and personal success. The business owner will not be overwhelmed by extraneous activities that will not affect the core definition of business and personal success.
- Identifies leadership, skill, or relationship gaps and creates action plans to fill these gaps and increase productivity. The business owner is able to enjoy the increased profits resulting from closing these drains on productivity.
- Articulates their short-term, medium-term, and long-term goals. The business owner is able to assess whether their current path and resulting metrics are pointing towards the achievement of their long term goals.
- Defines success. The business owner is able to establish a clear vision of their path to success and the measurements of that success.
- Identifies the key employees. The business owner is able to align their roles in a way that will maximize the productivity of the business and prosper from the substantial rises in productivity.
A sound strategic business plan eliminates the confusion surrounding important corporate decisions because the business owner is able to measure risk and reward against a clearly defined view of success.
As a result, the business owner does not need to agonize over competing paths that may or may not align with their business goals.
When driving a small business, have a plan—know the destination and how to get there.
About the author: Brian Kerrigan is a partner at Whittlesey’s Hartford office. He has provided tax compliance and consulting services for companies throughout New England for more than a decade. Connect with Kerrigan via email for more information.