In 2006, after having enjoyed plenty of success in his first eight years as a business owner, David Handmaker saw the tide turning. His Los Angeles-based printing company, Next Day Flyers, was losing ground to competitors that were adept at finding and serving clients online.
Handmaker knew he needed to respond, and fast, but he wasn't sure how. Transitioning from traditional sales and marketing tactics to Web-based techniques looked to be expensive: He would need to hire new people, invest in additional technology, and figure out how to put those new resources to best use. Until this point, he had relied on his gut for such decisions, but now he realized he needed a more rigorous approach. The time had come to do actual strategic planning.
As entrepreneurial milestones go, this isn't one that inspires founders to crack open the champagne and toast a Big Moment. Strategic planning smacks of something tedious or grimly bureaucratic: a time-sucking exercise that pulls people away from their real jobs to no good purpose. It may even seem like a genuine threat to the nimbleness and flexibility that most entrepreneurs thrive on and credit for their success.
Why go to the dark side? Because it can shed a lot of light on how to move forward. And, approached with the same energy and focus that you bring to every other aspect of your business, it can yield tangible benefits in relatively short order.
Even experts who make their livings advising companies on strategic planning agree that you can put off formal planning--for a while. But there is almost always a limit to how far a seat-of-the-pants management approach can take you, as Handmaker found. And sometimes you reach that limit sooner than you expect.
Two factors now make strategic planning even more important, says Ken Esch, a partner with Big Four accounting firm PricewaterhouseCoopers: globalization and technological innovation. The flattened world brings both new competitive pressures and new opportunities to grow--if you're disciplined enough to seize them. Meanwhile, technological advances have leveled the playing field for smaller businesses that want to compete with larger ones, but they have also accelerated the pace of change and the degree of uncertainty every business owner has to live with. You need a way to assess the big picture, and that's where strategic planning comes in.
Eye On The Prizes
Though the primary purpose of a strategic plan is to help you chart the smartest possible path to growth, there are other benefits. A good plan ensures that every member of your senior team is working toward the same goals, and helps you be smarter about budgeting, hiring, resource allocation, and succession planning. If you're looking for external financing, it can reassure lenders that you have both a vision and a specific plan to achieve it.
Keep those benefits firmly in mind as you begin the actual process, because it starts with a corporate exercise that can be a real groaner: a SWOT analysis. Yes, you'll start by listing your company's strengths, weaknesses, opportunities, and threats. The key is to connect that step to specific actions as quickly as possible. Handmaker says that once his SWOT analysis revealed that wasteful manufacturing processes and poor on-time delivery performance were major liabilities, he translated that into an instant action step: Hire a COO experienced in lean manufacturing. Within six months, Next Day pared half a million dollars from its annual paper costs and pushed its on-time delivery rate above 99 percent. "I learned that a great strategy is worthless if you can't match it to a tight operational plan," Handmaker says.
Focus primarily on the two extremes of your SWOT analysis: your best opportunities and your biggest threats. To make sure you get from strategy to implementation as quickly as possible, specify exactly who is responsible for implementation--the actual person or people, not simply a department or team, says Linda Pophal, owner and CEO of Strategic Communications in Chippewa Falls, Wisconsin. Similarly, spell out how progress will be monitored.
Don't worry about sacrificing flexibility. Your SWOT analysis will result in long-term objectives; you should break them down into shorter-term goals. Anselm Doering, founder of EcoLogic Solutions, a New York City-based company that makes and sells environmentally friendly cleaning supplies and technologies, says his company sets one-, three-, and five-year goals, focusing in the near term on the 10 percent of its priorities that are the most urgent or have the most potential. "We have to stay flexible, but at the same time we need a strategy," Doering says. "Otherwise, it's like being in New York City without a map--you want to check things out, but you're going to get lost."
Inside the Process
You would be surprised how quickly you can get from your initial strategic-planning meeting to actual results. Handmaker kicks off his annual strategic-planning session each September with a fresh assessment of core capabilities and external factors that could impact business. This isn't just abstract theorizing: In its initial foray into strategic planning, the company placed actual orders with an online competitor to gauge that company's capabilities. When the competitor failed to deliver, Handmaker became convinced that his company could enter and succeed in the online space.
In the past, that single experiment might have been enough to win the project a green light. Now, when his planning process uncovers a potential opportunity, Handmaker vets it against his personal appetite for risk and assesses its affordability and feasibility. If those hurdles are all cleared, the idea is passed to operational and marketing teams, which develop a plan for implementation. Sound clunky? It's not. Handmaker tries to complete the entire process within three months.
Since the company embraced strategic planning eight years ago, its revenue has tripled.
Even very small companies can benefit from strategic planning. Stanley Meytin, founder of True Film Production, a six-person, New York City-based video-production company, adopted a formal approach at the start of this year. He says he made the leap when he realized his company wasn't operating smoothly enough to cope with the growth it was experiencing, let alone the growth it wants.
Meytin's initial SWOT analysis helped him quickly develop short- and long-term goals focused on internal improvements to customer service. "Strategic planning is really an organized way of doing things that makes everything less stressful and lets us quickly put new ideas in action," he says.
5 Clues You May Need a Strategic Plan:
Not sure whether you're ready for strategic planning? Steve Harris, founder and president of the People Advantage, suggests that no matter how new your business may be, you may need a strategic plan if:
1. You're unhappy with your business results.
2. You're seeking funding or considering making substantial investments.
3. You're planning a major expansion of your staff.
4. You're about to step back from day-to-day involvement and need to shift decision making to others.
5. You're about to make big bets about how your company will grow.
"When in doubt, start creating a plan," Harris says. "It's better to be challenged with the process because you're a little early, versus needing a strategic plan that you don't have."