In small businesses strategic planning is often brushed aside as being too costly and time-consuming and taking too much attention away from operations. However, without a strategic plan, a business would lack the clear sense of direction it needs to be successful. So as an aspiring small business owner myself, I explored the question whether a small business really should do strategic planning or not and I found some interesting answers.
In short, strategic planning is not only for large corporations but for small businesses too. Clarity about the vision of the business, its objectives, where to play and how to win are critical for any business. A well-crafted, well-communicated, one-page strategic plan is however sufficient for a small business to succeed.
Such a one-page strategic plan does not need a lot of time or money to create. It only takes some strategic thinking about a few key questions. I’ll explore these questions in the following but first let’s understand why small businesses should do strategic planning.
Why small businesses should do strategic planning
The easy answer to the question whether small businesses should do strategic planning is of course: yes! But why really? Strategy is about making choices. But when you are just getting started, you don’t have much of a choice and pretty much jump at every opportunity you get to gain a customer and make a sale.
But even as a small business your resources are finite, your time is limited and there are millions of ways you can spend your time. You want to make sure your time and talents are directed towards those activities that will help you reach your objectives – fast. And for that you need a plan.
A plan helps you define what success means for you and how you are going to achieve it. Anyone who has ever aimed to reach any objective will tell you that any endeavor with a plan is more likely to succeed than one without. I’m sure you have the same experience. This is why football coaches create game plans and why my dad always looked at the route planner before setting off to drive the family to our vacation destination.
And that really is what a strategy is: a clear direction or plan of actions that will help you get to a goal or destination. So why wouldn’t you want to have a strategy for your business?
Truth is many small business owners feel they don’t have the time or the resources to create a complex strategic plan. Any time away from customers and operations feels like you are not making progress. And I feel the same way. Every time I don’t publish, I feel like I am wasting my time.
However, how do you know that you’re spending your precious time on the right activities? How do you know whether the customers you are pursuing are the right ones? And does everyone in your business from shareholders to employees understand why those activities and customers are the right ones? Are they spending their time on activities that are aligned with your objectives as well?
This is where a well-crafted, simple strategic plan comes in. First it helps to clarify why you are in business and what your main objective is. This is something I no longer take for granted. Even to remind myself why I got started in the first place is quite helpful to stay focused and keep motivated. When I hit a roadblock or have had a frustrating day, reminding myself why I am in business gets me back up to try again and keep going.
Next, having a strategic plan that clearly articulates the initiatives and metrics that need to be accomplished to succeed will actually get you there. A plan without execution is only that: a plan. So having a plan with clear initiatives and measures that articulates what actions need to be taken, how resources are allocated, and keeps track of execution will lead to success.
Finally, a simple but effective strategic plan aligns the team with the overall vision and objective. A plan that not only paints an inspiring vision or desirable destination but also shows a path how to get there really gets the team fired up and moves the team into motion. And you want the team to be as clear as you are about the business’ direction to be fully engaged and committed to do whatever it takes to achieve success.
A great way to summarize such a strategic plan is the OGSM methodology. OGSM stands for Objective, Goals, Strategies, and Measures and is a one-page business plan that defines where you are heading and how you are going to get there. It’s simple, it works well to get the team involved and it builds-in the execution plan. In my experience the OGSM is a great way for small businesses to create their strategic plan, drive execution and achieve the desired results.
What are elements of a strategic plan?
So what then are the strategic questions you need to answer for your small business strategic plan? Explore the following:
- Why are you in business? Don’t take this for granted or laugh it off. Being clear about why you are in business gives you and your company a purpose, a “raison d’etre”. What is it that made you start your business in the first place? How does running your company achieve that purpose? For me it helps to remind myself that I am in business to provide for my family and to inspire growth. That’s what gets me out of bed in the morning and what keeps me going when I hit a rough patch.
- Where are you heading? What is the vision and the objective for your business? The vision is your longer term aspiration while the objective is a concrete statement about what you want to achieve in a given period of time, e.g. 3 years or the next 12 months. Define unambiguous SMART goals that allow you to quantify your objective and measure success.
- How are you going to get there? Audit your external environment for opportunities and threats and assess your personal and your business’ strengths and weaknesses. Check how they match up and identify the ‘sweet spot’ where your purpose, vision, objective, strengths and opportunities overlap. Identify a small number of concrete customers or customer segments and product or service offerings in this focus area and figure out how to use your strengths to create a competitive advantage. Create 3-5 strategies that move you towards your objective and achieve your goals. The key point here is focus. You won’t be able to do everything for everyone. Double down on the ‘sweet spot’ and give it all your focus and energy.
- What obstacles could prevent you from achieving your objective? Go back to the threats and weaknesses you identified in your external and internal analyses and review your competition. Identify concrete risks that could prevent you from reaching your goals. Create mitigation measures to proactively address and overcome the most likely and most devastating risks.
- What key actions are you going to take every day to move towards your objective and achieve your goals? Now pull your key strategies and risk mitigating measures together and create a concrete action plan. Each action must have a timeline and caretaker. Make sure that the actions are sufficient to cover all strategies and achieve all goals. Review for clarity and get buy-in and commitment from your team.
- How are you keeping track of your progress to stay on course? Create a governance procedure, such as reviewing your action plan once per month and reviewing your strategies and risks every six months. Make a commitment to yourself and to your team to get at it and do not let off.
Capture the answers to these questions in your OGSM. If your OGSM is well-aligned following the above strategic questions, then you can fully focus on your customers and execute your action plan in daily operations knowing that it will lead you to achieving your strategic objectives.
And then go at it and execute, execute, execute.
To learn more about the OGSM approach to strategy, click here to read my introduction to OGSM and review each step in detail.
Why do small businesses ignore strategic planning?
Whether evident or not but every business has a strategy. Some businesses are more explicit about their strategy while others more implicit. Every business does somehow allocate resources and does decide which customers or projects to pursue to achieve results. Not every business however goes through a deliberate planning process and documents their strategy. And this can have several different reasons.
- Too busy – small businesses and their owners might be so consumed with keeping the business afloat that taking a step back and planning ahead seems like an impossible task. I always have to think of this cartoon in which two people are busting their guts pulling a cart with square wheels. When another person arrives and suggests round wheels they decline saying they are too busy to entertain his idea. Sometimes it can be very useful to take a step back to look at the bigger picture and confirm that you are still going in the right direction.
- Not sure how – some small businesses may simply lack the knowledge and expertise about how to do strategic planning or how to do it effectively. Strategy does not need to be rocket science though but can be a simple plan that sets priorities for the business.
- Fast changes – many businesses nowadays operate in rapidly changing environments in which a strategic plan may appear outdated as soon as it is decided. Even in those environments however it pays to be clear about what the objectives of the business are and how results are measured and achieved. Especially when there is a large team at work, when things change quickly, you want to reiterate your plans quickly and have everyone involved so that everyone knows at all times what’s important and how you plan to succeed.
- Owner led – a small business may be led by an owner with strong strategic skills who is able to mastermind the strategy and direct the team. Great industry knowledge or foresight may allow the owner to anticipate changes and adjust the course proactively. Nevertheless, making the strategy transparent and creating clarity about how everyone contributes to its successful implementation creates engagement and engagement creates results. In my experience an effective team is always stronger than an effective individual.
Whatever the reason may be, if you have not considered taking a step back for your small business to review the bigger picture and create a strategic plan, I would encourage you to do so. One of the worst things that can happen to a small business and its owner is to be surprised and unprepared in the face of an unforeseen event.
If you are still not sure where to start, don’t worry, you have come to the right place! Learn here how to create a business strategy that delivers results in 6 simple steps.
Common mistakes small companies make in strategic planning
While some small businesses ignore strategic planning, others have tried and failed. In fact, a Forbes Insights study of 163 CEOs revealed that more than a third of all strategies fail. Here are some common mistakes I have seen in practice and how you can make sure they don’t happen to you.
- Pursuing someone else’s strategy – reading strategy books and autobiographies of successful business owners and entrepreneurs can be inspiring. And copying someone else’s strategy can be a good idea. However it must fit your business. It must be an approach that you can apply and customize to your business and your situation. It’s fine to seek inspiration and motivation from successful reference cases. Reality is not every business will be the next Apple or the next Tesla. Blaze your own trail. Build a strategy that fits for you and your business.
- Spreading too thinly – No, I am not speaking about spreading Nutella too thinly on a slice of bread even though that would be a mistake as well (the ratio must be 2:1!). Lack of direction and lack of focus lead to spreading your resources across too many activities. You are much more effective if you can devote your entire attention and energy to delivering one thing instead of trying to deliver four, five or six things simultaneously. When developing your strategy, focus your attention on those initiatives with the biggest impact and highest likelihood of success towards your objective and goals. Do those first activities first that take you 90% there and then optimize later to take you the rest of the way.
- Working on the wrong things – If you are like me, it’s easy to get distracted by customers who yell the loudest or innovations or technical gadgets that seem most interesting. Resist the urge. Do not fall prey to “shiny objects”. Check your biases towards recent events, availability of information, or most memorable experiences. Focus on those things that matter most to your purpose, vision, and objectives.
- Lack of communication – what good does a strategic plan do when it lands in a drawer after it’s designed and doesn’t see the light of day? Make your strategic plan transparent to your business, your employees and key stakeholders. Over-communicate. Make sure everyone is absolutely clear what the priorities of the business are and how everyone contributes to the achievement of your objective – from management team to part-time aid.
- Starting with PowerPoint – when thinking about “strategy”, have you ever caught yourself thinking about presentation slides and strategy tools rather than an actual action plan? If you are planning a strategic review, do not first open your slideshow software. Start instead by talking to your customers and your employees about their challenges and what they would love to be able to do or achieve. Use the insights to design your strategy process.
- The most common mistake I have experienced though is not executing! Whether in large corporations or small businesses, the biggest issue with strategic plans is not doing what you said you were going to do. If this sounds familiar to you, don’t worry, you are in good company. And there are a million reasons for this: things change, quality issues get in the way, tragedy strikes, or you run out of cash. A strategy should never be carved in stone to remain flexible to adjust to changes in the internal or external environment. But be deliberate about building in the execution plan and review cadence and follow through ruthlessly. Pivot when you need to. But execute, execute, execute.
Now you know! And because knowledge is power you can now make sure that the same mistakes don’t happen to you.
Yes, strategic planning is not only for large corporations but for small businesses too. Strategy gives a business the direction it needs to be successful by defining where to play and how to win.
Developing a strategy does not need to be costly and time-consuming. It could be as simple as a conversation in your team about where you are heading and how you are going to get there. Whatever you do, document your objective, goals, strategies and measures on a one-page strategic plan, involve your team, over-communicate with your employees, and execute, execute, execute
Now over to you. How does your small business do strategic planning? If you have any questions or comments, why not drop us a reply below. We would love to hear from you.