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Strategic Business Planning - Part 1

Aug 17, 2007
To many managers, the term "business planning" is a buzzword to describe what 30 years ago was conceived as the financial budget, and therefore the restricted realm of the accountant. To others it may represent a document required to obtain an overdraft or a loan from their bankers. A business plan may prove to be the most important document that may be compiled in any business. This paper aims to eliminate such taboos and simplify what the strategic business planning process is all about, and how its benefits could be maximised by the management of a business.

When we speak about a strategic business plan, the message to be conveyed is about the strategies and tactics to be adopted by an organisation to reach its missions and goals. An integral part of the plan is financial in nature, but the strategic business plan is no plan at all if it does not address marketing, human resources, ICT and all other resources needed to integrate and fuse the organisational efforts to achieve targets, in terms of maximisation of profits. Thus, an effective business plan should serve FOUR underlying purposes:

It is a tool for management to convey both within and outside the organisation the goals for the business plan period;
It provides the strategic framework for holistically managing the business;
It allows the identification of objectives and how the attainment of these objectives could be achieved and, most importantly, closely monitored

By demonstrating that proper controls and achievement of objectives are happening, it provides an effective means of attracting new capital to finance the business objectives.

Many have compared the marketing of a strategic business plan to a candidate's CV, when applying for a job. What must be ensured is that the plan is not just figures and numbers, but also shows a good understanding of all those essential determinants in reaching the stated targets. Thus, we should first and foremost ask ourselves questions such as:
Who are we?
What do we do?
Who are our customers and what are their expectations?
What and where will our business be in one, two, three, five years?
What are we doing NOW to get where we want to be?
How should we get there?
Do we have the resources in terms of machines, people, finances, technology and so on?
Do we need to obtain external financing and what type/extent is convenient to us?

We could keep going on asking questions as much as we would like our plan to be detailed. Probably the answers to some would need more effort in terms of time and resources than others. The most important factors which determine this preliminary stage of planning is to ensure that we are asking ourselves the right questions, that they are leading our business in the direction we want it to go. On the other hand, a manager must be aware of asking too many questions that lead nowhere. The objective of this process is to enable the manager to grasp what the target is and then plan on how to achieve that target.

What are the nuts and bolts of an effective and sound strategic business plan that truly delivers the business targets? The mission, objectives and overall strategy must be determined. Particular attention must be focused on the implementation and evaluation stages that follow the setting of objectives and strategies. It is here that a business will succeed or fail. Experience has shown that at times, a business plan needs to be radically changed after one year, to conform with the ever-changing and volatile business environment. Do not be surprised! This is a healthy experience. As every manager knows, rigidly sticking to a particular plan, where the business encloses itself in a cocoon, can bring about those looming black clouds of ensuing business failure. Exhibit A (in Part 3) presents the Critical Success Factors (CSFs) of good strategic business planning, whilst Exhibit B (in Part 3) illustrates the benefits accruing from a properly organised plan that distinguishes one business from another. These benefits ensure that the organisation is homogeneously geared and glued towards the ultimate objective of maximising profits.

We must remember that even the best of business plans, which takes many hours to compile, will only take a few minutes of the reader's time. Perhaps, a cursory glance at the executive summary and the conclusion will be the main determinants for the success or otherwise of the plan. It is true that great business ideas backed by superior management techniques will probably succeed without any written presentation. But, that minute possibility of failure necessitates extra effort for that slight edge over the chances of success. In plain words, this means that a strategic business plan MUST itself be planned! Exhibit C (in Part 3) provides a practical guide, showing the essential requirements for the success of a strategic business plan. Managers must put themselves in the shoes of those who will read the strategic business plan and who will then subsequently take the decision, be it the board of directors, the bank manager or a creditor. Thus, what the reader wants or does not want to know, determines the structure and flow of the plan.

...continued in Part 2
About the Author
Sandro Azzopardi is a professional author who writes articles on his web site and local newspapers. http://www.theinfopit.com/business/planning/strategicbusinessplanning-1.php
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