Every Small Business Faces Volatility
I'm making a bold claim about strategic planning for small businesses: the ones that have them are in the best position to weather volatility. Businesses without a strategic plan are in for a rude surprise.
Here's a personal example that paints the picture.
Back in my publishing days, the imprint I worked for struggled. Imagine my shock when I strode into the office one day and discovered that my boss had quit and I was elevated to take his place as the publisher of the worst-performing division of Thomas Nelson. I knew things weren't great before my boss left, but I didn't realize how bad things were until I took the reins.
Here's what I found:
- We were the least profitable imprint of fourteen in the company. We had lost money the previous year, and people in the other divisions were mumbling that our performance had dragged the whole company down.
- Revenue hadn't grown in years. And to add insult to injury, one of our competitors walked away with our bestselling author.
- We were consuming enormous corporate resources and providing virtually no return to our shareholders.
- The team was small and overworked. We published about 125 new titles a year with ten people, and the quality suffered.
The imprint had no vision or plan. This was the first thing I set about to fix when I took over. And once we created a strategic plan and executed it, we turned things around in 18 months. What was the worst-performing division in the company became the best.
And it all started with a plan.
But what about businesses now in the post-pandemic world?
The Data About What’s Ahead
Bank of America recently published a report surveying 1,300 small business owners in the United States, asking what they expected in the next year.
The results were surprisingly positive.
In the face of rising interest rates, inflation, supply-chain issues, and hiring challenges, 66% expect their revenues to increase, and more than half are considering expanding.
But the U.S. Chamber of Commerce paints a less rosy picture, with confidence among small business owners dipping as fast as at the start of the pandemic. Inflation, a worsening economy, and a sense that the worst is yet to come top the issues that have business owners' attention.
How Do Small Business Owners Move Forward When Their Gut Contradicts the Data?
When one report says business owners are excited about their expected revenues in the next year and another says things are bleak, you have to wonder who they're talking to. Whoever is closer to the truth, we can be sure that no small business owner looks at the same economic environment through the same lens.
This is why strategic planning is crucial for every small business owner.
But before we get into the benefits of a strategic plan and how to build one, let's first define what a strategic plan is.
What Is a Strategic Plan?
A strategic plan is a written vision of where you want to take the company combined with a plan for getting there. This vision defines where you want your organization to be in three years.
- What will your business be three years from now?
- What's the plan to get there?
- What are the obstacles that can throw us off course?
- How are we going to respond to those when they happen?
Strategic planning is about working on your business to get a 30,000-foot view of your company and ensure you're headed on the right course.
You and your leadership team can do the planning work in three days if you do it right.
Why Strategic Planning Matters for Small Businesses
Every business is different. As we saw with the Bank of America report, there are small business owners who expect to do better in the next six months than they have in a while. Their approach to the next year will be different from that of a business owner who's more severely impacted by inflation and interest rate hikes.
Wherever you fall on the spectrum of concern over the economy, I would still say strategic planning is a must. In my 40-plus years of business, I've found three main benefits of creating a strategic plan:
Benefit 1: A strategic plan improves your odds of success.
If you've been in business for a while, you know how tenuous success can be. It can be feast or famine.
But here's the reality: according to the U.S. Department of Commerce, about a million businesses will be started this year. Eighty percent of those businesses will fail within the first five years.
Of the 20% that survived the first five years, 80% of those will fail in the next five years. This leaves a 4% chance of surviving ten years.
I don't like those odds.
Strategic planning gives you vision, direction, and benchmarks to help you evaluate tangible opportunities from distractions that can sink you.
Benefit 2: A strategic plan provides focus for your work.
Great new ideas are sometimes just distractions masquerading as opportunities. Falling for their trap is a fast track to your business becoming really unfocused. And for you and everybody on your team, a lack of focus leads to massive overwhelm.
The strategic plan provides a filter and focus, so your team spends the bulk of their time working on the most important things.
Executing your strategic plan moves your business toward the milestones on your Vision Script.
Without that plan, the work is unfocused. The result is that your people are busy with work that doesn't matter, because it's not headed in a strategic direction
Benefit 3: A strategic plan gives confidence to you and your team.
Here's a dirty little secret: your team knows when you're winging it. They know when there's no plan. Having a plan helps you:
- Get a better night's sleep.
- Gain confidence that things are headed in the right direction.
- Know that you're not just busy but being productive.
Most importantly, having a plan gives the team confidence in your leadership. Everybody wants to follow a leader with a plan. Nobody in the history of the world ever said, “What I'm looking for is a leader without a plan.” That just doesn't happen.
How to Create an Effective Strategic Plan
Now that we've covered what a strategic plan is and how it helps you, let's dig into creating one. You can create a solid strategic plan for your small business by setting aside time with your leadership team and writing a plan containing these elements:
- Vision. Create a clear picture of where the company is headed.
- Current Reality. Come face-to-face with your current reality. This is the time to be honest with yourself and your team. Conduct a SWOT analysis.
- Where You're Going. Based on the vision and your current reality, define where you're going over the next three years (but especially in the next year).
- How You're Going to Get There. This is the strategic piece: Define how you will get from where you are to the destination you defined in Step 3.
- Benchmarks to Know You're on Track. List progress markers that will indicate you're moving closer to realizing your vision.
I've been part of many strategic planning processes, but the most useful ones include these five elements.
One more requirement for you to create an excellent strategic plan: it must be written down. Why write your plan? For clarity.
The ideas between your ears can be fuzzy. But when you start to get your ideas out on paper and have your team do the same—it's easier to tweak and fine-tune to get the absolute crystal clarity you need.
Remember . . .
What to Do if You Need Help
An effective strategic plan is your atlas that guides you through whatever changes your company faces in the next three years.
When it's done the right way, it keeps you on track, helping you avoid fool's gold opportunities that distract you from the vision and goals you set down in your strategic plan.
And while you can create a strategic plan on your own, that's not for everybody. If the idea of creating an effective plan for your small business is intimidating, we're offering an on-demand version of our Strategic Design Workshop.
This workshop details every financial report you'll need, the information to gather from your team, and how to put it all together in a plan that becomes your company's field guide for the next 12 months.
Business owners who sign up for the On-Demand Strategic Design Workshop will walk away with:
- Powerful strategies that move your company forward. With our framework for strategic planning and the coaching you get during the workshop, you will have a plan that's actually useful. And when you do it right, this resource will become your company's compass.
- A rubric for decision-making. When you go through this exercise, you know what's important for your company. You'll be ready when situations and circumstances change over the next year. And you'll have the flexibility to modify as you go, all while your company makes steady forward progress.
- A tool that helps you identify fool's gold opportunities and make positive, impactful decisions.
Click here to learn more.
Whether you create a strategic plan on your own or you get help from something like the Strategic Design Workshop, I can't emphasize enough how important strategic planning is for your company's success, especially with a highly volatile economy. When I reflect on my past business mistakes, almost every single one can be traced to a lack of planning.
This doesn't have to be you.
Remember, the strategic plan isn't just about what you do. It's also about what you don't do.
You'll have a document that tells you and your leaders what matters for your company. What initiatives to pursue. Which initiatives to ignore or delay.
If you haven't created a strategic plan for your small business, carve out some time and get one in place.
Your future self will thank you.
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