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Business Guide To Strategic Planning

Strategic planning is the process by which an organization evaluates its current position, plans to improve profits and efficiency, and provides contingency plans for meeting business challenges. Strategic planning requires focusing on an organization’s industry, economic forecasts, and organizational resources for the purposes of hiring, expansion, technology updates and resource investment. Strategic planning has benefits, pitfalls, and costs. Determining how to implement strategic planning requires evaluating the purpose, potential advantages, drawbacks, and expenses as they apply to your organization. Considering all aspects of strategic planning is helpful in determining how it can work for your organization. Discussing benefits and drawbacks of strategic planning with management and employees can provide insight into how strategic planning brings value to your organization.

Focus

In any business climate, whether solid or weak, strategic planning can play an important role in determining the success of a business. Although many business experts have predicted weakened sales, profit and employment in the current financial environment, few companies have taken the time to actively plan what needs to be done to ensure their businesses’ strength.

A survey done by Dun and Bradstreet in 2009 showed that many businesses felt they would see fewer sales, smaller profits, lower employment, and even less capital investment in the June 2009 quarter. More than 50 percent of the firms surveyed anticipated lower sales, and 60 percent expected lower profits. In order to rise above such low expectations and make a business profitable, it is important to utilize every tool available—especially the tool of strategic planning.

Benefits

Although strategic planning has a variety of benefits, many businesses fail to understand its importance. One of the reasons why many companies neglect to secure the rewards of strategic planning is that they may not understand what it entails.

Identification

When a business sets up a successful strategic plan, it can immediately identify key players within the company. Not only are the key personnel named, their job descriptions allow for instant access to information, which helps with resolving problems. For example, if a company has problems with shipping, a solid strategic plan identifies the personnel responsible for shipping problems, making communication quick and effortless.

Vision

Every successful company has a vision and a mission. Strategic planning allows a business to understand what its vision is and makes sure that vision is articulated to every member of the company. If a company’s vision is to have the best customer service in the country, strategic planning implements programs focusing on terrific customer service.

Savings

Strategic planning encompasses business savings. The initial cost of the plan is minimal compared to the overall savings provided. Successful strategic planning looks at the overall business practices and focuses attention on areas in which savings can be created. Businesses find that the cost of engaging in a strategic plan is worth the end savings found by those programs.

Concrete Plans

A strategic plan involves putting everything in writing for everyone to examine, discuss, and implement. It is one thing to have a common goal discussed, but it is something else to have that goal put on paper and studied. Having solid plans also allows personnel to know and understand what is expected from them, and it gives them the opportunity to go above and beyond what their own duties are, thereby increasing a company’s productivity and growth.

Pitfalls

Price Competition

A common mistake many people make when starting their own business is trying to compete with their competitors on price alone. This is a very fast way to end up bankrupt.

Business is all about making profit, and having a smaller income with a larger profit margin is always better than having a great deal of revenue but earning almost no profit.

Thinking Small

Many new entrepreneurs just want to make enough money for themselves and nothing more. If your goal is not to continually expand and make increasing profits, then the chances of your business failing are greater. If you think big, you may still fail, but you'll get a lot further before that happens.

Starting From Scratch

Starting a business from scratch may be less expensive, but it will take up a great deal of your time and energy. Time is your most valuable asset as an entrepreneur because many new businesses can fail during the initial start-up phase. A better option is to buy a small, failing business and take it in a new direction.

Capital

A fatal error the owners of many new businesses make is failing to have sufficient operating funds on hand. Often they underestimate the amount of money needed to run the business, and the business is forced to close before it has been given a fair chance. Also, new business owners frequently have unrealistic expectations of incoming sales revenues. They tend to rely on these funds to stay afloat, and when profits aren't as high as required, the business folds.

It's important to understand how much money your business requires, and this includes the start-up cost and the cost of staying in business. A new business can often take more than a year or two to get going, so you need enough funds to cover all your costs until sales can cover them.

Pricing

Strategic planning can be expensive in terms of money and time, but regardless of whether the economy is doing well or performing poorly, strategic planning can give your company a vision for future success.

When considering the price of strategic planning, it is best to consider the cost in money and in time.

Money

If your idea of strategic planning is reading one of the many best-selling books on the subject and then brainstorming with your staff, strategic planning won’t cost much. Although this seems like a low-tech method, working directly with your employees might be the best way to obtain a sustainable and accepted strategy. However, other options are available. Strategic planning seminars typically cost between $1,500 and $2,000. Hiring an in-house consultant to work with strategic planning can cost $3,000 to $10,000. Costs for strategic planning seminars and consultants can vary according to your industry and location; shop around to determine the current costs.

Time

If time is money, then you must also consider how long good strategic planning takes. Having several members of your staff postpone their normal duties for multiple days for brainstorming and planning is costly, even if it does not involve you writing a check. Be sure you are ready for the disruption in normal operating procedures for a short time.

Conclusion

Strategic planning provides value to an organization by identifying an organizational mission, forecasting business needs, focusing on priorities, and establishing a framework for moving your business and its employees forward. Financial costs and operational interruptions must be weighed against the potential advantages of strategic planning, and are essential for determining the scope of strategic planning for your organization.

Consulting with your business accountant or financial adviser is useful when you are determining how strategic planning can assist your organization with improving current operations, building its future, and guarding against setbacks. Whether strategic planning involves conducting brainstorming sessions with employees and stakeholders or a professionally led conference or retreat, the value of strategic planning can be measured in improvements in employee commitment, organizational focus, and the reduction of potential hazards and risks to your business.