Original content provided by BDO Australia.
This is the first article in our ‘Best practice for SMEs’ series, designed to ensure you, and your business operations, are at the top of your game throughout the year. No matter which industry you’re in, we’ll help equip you and your team with the resources and information to help you thrive.
Successful businesses know strategy and planning are key to reaching operational goals.
Best practice strategic planning is a highly valuable process, regardless whether your business is performing well or you are exiting the market – setting a clear direction, remaining true to your goals and re-assessing your plan will provide the best chance of success.
There are many examples of businesses founded on a great idea, which ultimately flounder when they lose sight of their goals, or are unable to effectively manage rapid growth. A strategic plan is your best defence against this scenario.
So, what is a strategic plan, why are they important for SMEs and what are the steps involved? Read on to find out.
What is a strategic plan?
A strategic plan is a well-informed, holistic roadmap for your business, providing a framework and accountability for your goals.
It’s a constant guide for your daily, weekly, monthly and annual decision making – consider it the ‘true north’ reference point for your business. While flexibility in execution may be required, your plan’s overall objectives should remain your touchstone.
A strategic plan keeps you and your team focused, providing a solid vision and certainty, enabling consistency in messaging and giving confidence to the business and stakeholders.
Scenario planning
Before and during the strategic planning process, you should consider the various ‘what ifs’ – the scenarios or disruptions that could be on the horizon, and how you might adapt.
While you can’t predict the future, you should have contingencies in place that allow you to make decisions and resource effectively when things don’t go to plan. Where uncertainty exists, confidence is invaluable - planning for unexpected outcomes will give you that confidence and can help prevent significant financial impacts.
Scenarios you plan for will depend on your industry and business, but examples might include:
- Retirement or resignation of key people in your business
- Loss of major export market
- Collapse of a key client or supplier
- Your own illness or incapacitation
- Sudden and dramatic increase in demand for goods or services.
The pandemic is an obvious example of an unexpected scenario. When the widespread impact of COVID became apparent, those businesses that factored scenario planning into their strategic planning process were better able to adapt.
The strategic planning process
A best practice strategic planning process for SMEs has five key steps:
Measures and metrics to consider in a strategic plan
Measures and metrics certainly have an important place in strategic planning, but they shouldn’t overwhelm the process. They are particularly useful in ensuring accountability, and can be used to identify and measure performance indicators and track progress. Defined measures allow you to identify what you are doing well, or not so well.
Best practice strategic plans don't have too many measures. Rather, the business identifies key metrics – perhaps five or six – that are best aligned to the strategic outcomes and then use them to keep on track.
The measures you include may be financial, employee-related or otherwise, depending on your industry and specific goals.
Businesses that demonstrate best practice in this area take a holistic approach to management and operational reporting. Their reporting is aligned and refined – not done for the sake of it. An example of this approach is a regular ‘heads up report’- a summary of key indicators for each section of the business. This might be operations, people, marketing, finance, or IT – depending on your industry and size of business.
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