What is the Strategic Planning Process for Small Business Owners?
Strategic planning is a systematic process of envisioning a desired future of you small business and translating this vision into broadly defined goals and actions plans to achieve them. It aligns your resources to carry out the action plans. In addition, strategic planning ensures that everyone in your small business is on the same page on the direction and future of the small business.
Read more about strategic planning here: Basic Strategic Planning and Key Statements for Small Businesses. The outcome of the strategic planning process is normally documented in the business plan: Read Outline of Business Plan for Small Businesses.
The strategic planning process is an iterative process consisting of three steps:
- Visualize – Where do your small business want to be?
- Analyze – Where are your small business now?
- Strategize – How are you, as small business owner, get from where you are now to where you want to be?
It should be stressed that the strategic planning process is iterative and not linear (sequential process) and the steps impacts one another.
Small Business Visualization – Where do you want to be?
What do you see your small business becoming? Without visualizing your small business’s future, the owner and employees wouldn’t know where they are going and what they must achieve. In this step, the focus is on where the small business is going rather than how it will be getting there. It defines the desired end state and overall strategic goals.
Formulating Key Statements for Small Businesses
Firstly, you need to formulate your key small business statements to guide the strategic planning process:
- Vision Statement: A vision statement describes what your small business desires to achieve in the long-run, generally in a time frame of three to five years.
- Mission Statement: The mission statement is a brief description of your small business fundamental purpose and the reason for its existence.
- Values Statement: The value statement for your small business informs the customers and employees about the business’s top priorities and core beliefs.
Read more about these statements with examples here: Basic Strategic Planning and Key Statements for Small Businesses
Small Business Strategic Goals
Secondly, the small business owner needs to set specific strategic goals that he expects to accomplish (target) over a specific period (three to five-year planning horizon). These strategic goals target the fulfillment of the vision and defines how small business success will be measured in the desired/ideal end state. Keep your strategic goals at a high level and stay outcome focused. Your visionary goals typically fall within some of the following strategic areas:
- Portfolio – Product/service offerings, expansion, innovation, etc.
- Financial – Growth, revenue, profitability, share-owners return, etc.
- Customer – Customer satisfaction, service quality, etc.
- Network of partners – Building the network, partner loyalty, etc.
- Employees – Happiness, workplace safety, employee development, etc.
- Community – Community involvement, philanthropy etc.
This list of goals should be short (around 5) and reflect only the most important high-level aspirations of your small business. The participation of high-level individuals within the small business, if possible, is desired in order to develop your strategic goals on a consensus basis. The strategic goals must be allocated to individuals (could be owners, managers/key employees) that will take ownership of them.
Competitor Research and Analysis
Competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. This analysis helps you to formulate both offensive and defensive strategies to outsmart your competition. Start with finding out who are you top 5 direct and indirect competitors. Visit their website (if they have one) and physical locations. Also keep track of new entrants/competitors.
For you as a small business owner to understand your competitors, assess and document the following:
- Company Information such as location, number of employees, turnover, profitability, etc.
- Main product/service offerings, market share, pricing, and how are they marketing them.
- Products or services the competitor offer that you don’t and why?
- Competitors’ strengths and weaknesses serve as barriers for you to enter the market.
- How does the competitor attract and treat their customers?
- What is the window of opportunity for you to enter the market and on what basis can you compete: price, quality, or service?
- How does the image of your small business compare to your competitors?
- How does your website compare to your competitors’ websites and do they use social media?
- How do the competitor’s infrastructure, equipment, and technology compare to yours?
- What is the exposure of your competition in printed media, online, and networking/public appearances?
- How do the competitors’ operations and distribution processes compare with yours?
Small Business Analysis – Where are you now?
In this step the small business owners analyzes and evaluates the current situation and how it came about. It identifies the gap between the present and the desired state as identified in Step 1, and why it exists. Depending on if you a new or existing small business and how many cycles you have gone through in the strategic planning process it could include any of these analyses:
- Market Analysis: A market analysis is an assessment that allows the small business owner to determine how suitable and attractive a particular market is for his business’s products or services. Market analysis is used to evaluate current or new markets. Read more detail: Market Research for Small Businesses
- Competitor analysis: Competitor analysis allows the small business owner to assess its standing among the competitors. Competitor analysis is one of the main drivers of a small business’s strategy. Read more detail: Market Research for Small Businesses
- External Environment Analysis: External environment analysis is an assessment of the key external macro-environmental forces (political, governmental, economic, social, and technological factors) that affects the operations and performance of your small business. Small business owners should assess how the business is affected by these and these forces and the level of threat or opportunity they present, now and in the future.
- Internal Environment Analysis: Internal Environment Analysis is an assessment of the small business resources, core competencies, and operations. It gives the small business owner a good sense of the gap between the present and the desired to fulfill the business’s vision and strategic goals.
The best strategies for a small business should be based on a thorough SWOT analysis. It forces small business owners to ask uncomfortable questions to get the answers. A SWOT Analysis is a powerful technique used during this step to evaluate the Strengths, Weaknesses, Opportunities, and Threats of the small business. During this analysis the internal and external factors are identified that are favorable and unfavorable in achieving the goals of the small business. It uncovers opportunities that you as a small business owner are well positioned to take advantage of. In addition, it provides insight in how to manage the business weaknesses and remove threats. Read SWOT Analysis – A Useful Small Business Analysis and Planning Tool
Small Business Strategizing – How do you get from where you are now to where you want to be?
Within this step the small business owner creates the path/roadmap to achieving the vision and strategic goals that were set in the visualization step. This includes:
- Establish Critical Success Activity: The small business owner identifies the essential areas of activity to achieve strategic goals. Ask: What must be done to achieve the strategic goal, such as “attract new customers”, “train employees in specific technology” and “finance expansion”. Consider your customer, personnel, operations, finances, assets, technology, etc. when thing about these critical success activities.
- Defining Short Term Business Goals: For each of these critical success activities, the small business owner formulates short-term business goals to ensure that critical success activity is successfully executed. Typically, these business goals are set for a one to three-year time period. Short-term business goals should be SMART (Specific, Measurable, Achievable, Relevant, and Time bound).
- Develop Action Plans: Each of the short-term business goal requires and action plan to ensure that the goal will be met. A time frame should be set for the action plan to achieve the short-term business goals. Each proposed action/activity in the plan should cover responsibility/accountability, milestones/timing/duration, desired outcome/measurable deliverables, progress indicators, resources needed and recommendations.
Also refer read: 5 Easy Steps in Developing Key Performance Indicators