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I believe a timeless (and entertaining) quote famously attributed to baseball great Yogi Berra should be top of mind for entrepreneurs interested in expanding their business: “If you don’t know where you are going, you might wind up someplace else.”
Throughout my 20-plus years of business experience, I’ve seen many successful companies grow by using tried and true strategies, such as managing cash flow, keeping credit scores strong and obtaining low-cost, outside funding. Another characteristic they share? Each had a solid, multiyear plan. But a 2018 survey found that 63% of small business owners only plan roughly a year in advance.
It can be tough for a multitasking business owner to step away from day-to-day tasks and focus on the future. However, I believe taking the time to formulate a strategic plan is one of the best ways to reach short- and long-term goals. “Strategic planning” might sound daunting, but the process doesn’t have to be complex. Once you’ve developed your three- to five-year plan, you can develop a short-term annual plan that folds right into your long-term goal.
Consider the following five steps when crafting your long-term plan:
1. Write down your mission.
This might sound simple, but there’s something very powerful about putting your plan on paper. I believe the first step to creating a strategic plan starts with making the mission of your business clear. Where are you headed, and what do you want your business to look like in three to five years? Write your answer down so you have something concrete to work toward.
Your answer might be the vision you have for the future. Write down one to two sentences to get started. Be brief and realistic, but don’t be afraid to be ambitious. For example, let’s say a woman named Holly runs a bakery. Her mission might look something like this: ”Holly’s Bakery offers delicious, high-quality, fresh-baked desserts to high-end restaurants in the San Francisco area.”
2. Set goals for your business.
These goals, some of which should be financially focused, are what can help you achieve your overall mission. Build a three- to five-year plan and forecast that matches your financial and overall business goals.
To get going, start with the big picture. Write down the ideal future you see for your business, and make sure it’s related to your mission. Then use the “SMART” method to craft specific goals. SMART is a relatively common set of criteria I’ve observed many people use when establishing a goal. It means your goal should be specific, measurable, attainable, relevant and time-bound.
Consider the previous hypothetical example. Holly has four long-term goals for her bakery:
1. To become the No. 1 baked dessert supplier, by dollar volume, in the city of San Francisco to restaurants with five stars.
2. Secure five-star annual ratings from every customer.
3. Grow revenue to $5 million annually by 2021.
4. Generate $350,000 annually in net income by 2021.
Separately, Holly should create a financial plan that indicates her specific goals for the year 2019.
A financial plan is a forecast for your business and includes an estimated balance sheet, income statement and cash-flow projections. This model helps create a road map of income and expenses to indicate where you stand now and where you’re headed in the future. Use your financial plan to determine when and where to invest funds in your long-term plan.
3. Identify broad key strategies.
Once you’ve defined your goals, think about the overall strategies and general tactics needed to achieve these goals. Your strategies might include building out facilities, purchasing equipment, securing enough financing to achieve your plan and more.
Let’s look at our bakery example. For Holly to achieve her long-term goals, her key strategies would likely include hiring and training top pastry chefs, building a strong, recognizable brand in her area, developing a vertical supply chain to secure the best ingredients and securing financing to purchase quality equipment.
After you’ve identified these key strategies, create a specific annual plan for these strategies. For instance, regarding hiring and training pastry chefs, Holly might consider participating in recruiting events or visiting a culinary school for graduates.
A strategy to help you get specific is to look at the end goal and work backward. By reviewing her financial plan, Holly should have a good idea of when she needs a trained a pastry chef ready to bake in her kitchen. Identify the costs and time associated with hiring and training, and put steps in place to meet that deadline.
4. Measure Ongoing Results
Now that you have written down your vision, established your goals and outlined strategies and specifics, it’s time to measure your progress. Choose practical benchmarks, and measure how your strategies are performing consistently. Remember to be flexible. If one strategy isn’t performing well, consider changing it so that you can still achieve your goals. As any small business owner knows, there are a number of factors that influence a marketplace. So, your strategies should be measured and revisited when you aren’t hitting results or when major events happen that could impact your business.
In Holly’s case, after measuring the effectiveness of direct mail marketing, she found it wasn’t as cost-effective as she thought. So, it’s time for her to consider making a change to her marketing tactics.
5. Stay positive.
To set yourself up for long-term success, keep up your efforts — and stay positive. Review and adjust the steps above to make sure you stay on track. Remember that your plan doesn’t have to be perfect to achieve your goals. And possibly most importantly, don’t hesitate to ask for help. A financial professional or even members of your team can offer direction and advice if you’re feeling stuck.
Without a plan, I believe you run the risk of failing. In my experience, a long-term plan can not only strengthen your bottom line but also help keep you motivated as you weather the inevitable ups and downs of entrepreneurship.
April 3, 2019 at 10:19AM
Forbes – Entrepreneurs