You Must Strategize

The fall is the general planning season for business. What is your procedure for planning?  Do you have one? 

Growing evidence suggests a huge benefit from strategic planning for businesses. In order to survive and thrive it is important that you get a planning process going for your company or department. 

 

Only one out of five small-business owners practices any type of business planning regularly despite mounting evidence of the link between strategic or business planning and business success and between lack of planning and business failure. 

 

Scientific studies in the field of small-business success have demonstrated a strong relationship between business planning and the prospects for business success.  Moreover, studies have shown that practicing strategic planning, which is the highest level of business planning, can have an even greater impact on the financial performance of small businesses. Yet, despite mounting evidence of the benefits of strategic and business planning, only one out of five (19%) small-business owners practices business planning on a regular basis.  

 

In a three-year study (Gibson 2000) conducted with 6,400 small businesses, the researcher found that only 19% of small-business owners practice business planning on a regular basis. This study, which was conducted with small businesses in Australia, also found that about half (49%) of the businesses are not engaged in any type of business planning. 

 

In another study of 1,004 small businesses in Canada (Orser 2000) the researcher concluded that the presence of a business plan is highly correlated with the performance of the business, and contributes to the growth of the firm.  Similarly, a study of 152 small businesses in the US, (Perry 2001) found “Strong indications that planning does make a difference and can reduce the probability of firm failure.”  

To make it simpler and easier for small business owners to choose the right type of planning for their businesses, researchers have studied the impact of three levels of planning on the performance of companies. 

A study by Bracker (1986) examined three levels of planning: 

1)  Strategic Planning – long-range plans (3-15 years) focused on the direction of the company,

2)  Operational Plans – mid-range plans (one year) focused on budgetary and activity issues, and

3)  Initiative Plans –short-term and informal plans that are based mostly on the intuition of the small-business owner. 

The conclusion of this study was that “Firms that conformed to strategic planning categorization outperformed all other planning categorization with regard to overall financial performance.”  

These findings may provide an explanation for the grim statistics on small-business failure in the US.  According to the Small Business Administration (Office of Advocacy 2004), there were 589,837 small-business terminations in 2003.  This figure includes 35,037 bankruptcies and 554,800 small-business failures. 

So why do most small-businesses owners choose not to plan even though it is well documented that business planning in general, and strategic planning in particular, can increase their odds of business success?  This is a question that every current and future small-business owner should reflect on.  Regardless of the answer, the reality of small-business success remains the same; you need to strategize or you may be planning a business funeral.

So to avoid the funeral how do you go about this planning regimen?  The Book “ The Manager’s Pocket Guide to Strategic and Business Planning,” written by Stephen G. Haines, published by HRD Press, copyright 1999 is a good guide to Planning. It describes a visionary approach to the strategic thinking involved which involves setting the vision as to where you want to go then collecting feedback on that. You assess the feedback then set the strategic action plans. The loop is somewhat continual as the assessment leads to adjusted actions.

One of the Amazon.com top selling business panning books is the “One Page Business Plan” written by Jim Horan, copy write 2003, published by The One Page Business Plan Company. The method which is endorsed by business guru Tom Peters involves the annual development of a business plan on one page including your vision, mission, objectives, strategies and action plans. The result is a tightly written, comprehensive document that you can evaluate and report on monthly. The plan becomes a dynamic, living document that is integral to your operations. 

Most business people find it beneficial to get some outside help in the planning process. It helps to have an independent consultant that is well schooled in the process of planning and can ask you the deep questions that will lead to a dynamic, useful plan. 

You can use the two books mentioned to get you started on the road to a good business planning process. Based on the data available it is critical to get started and get it done.