The Important Role of Planning

I thought I would open this blog with a few quotes:

Says it all really, but all too often the subject of planning is overlooked by SME business owners and their senior managers, or poorly implemented.

Effective planning really can be the difference between success or failure particularly in a competitive and fast changed environment - the difference between hitting your goals and objectives, or losing your way, increasing stress, and potentially giving up.

However, good planning is not just about goals and objectives. You need a clear roadmap that pulls together and leverages the key components of your business model, and provides for appropriate strategies and priorities, regular review against key performance indicators, and the ability to adapt.

So let’s dig into the subject.

Strategic and Business Planning

Strategic planning and business planning are both important processes to successfully grow and maintain your business. However, their characteristics and core purposes differ and can be confusing.

Strategic Planning

The fundamental purpose of a strategic plan is to broadly look at the longer term (usually 3 to 5+ years). Whilst challenging to look into a crystal ball, a good strategic planning process will focus on where you want to take the business to (and answering the "why") and identifying the best  strategies on how to get there, albeit broadly.

A strategic planning process is useful to:

·         define your vision, mission key goals and objectives.

·         identify higher-level strategies.

·         bring alignment between different stakeholder interests, whether at an equity level or with management and staff. It helps to bring together everyone “on the same page”.

The planning process will include environmental analysis using SWOT/PEST tools or similar to get a handle on both the internal and external situation; financial modelling; resource considerations and performance monitoring.

Example: Owners of a tech startup business might use a strategic planning process to start on their market entry strategies, their product development activity to align with market needs, and to pitch for funding, partnerships and alliances. Certainly, a potential funding source would require evidence of thorough planning and due diligence!

Business Planning

In contrast, a business plan is shorter term, usually one year, (typically spanning  the financial year) and covers more detail and operations - homing in on the “tactics”, "how" and "when" of actioning strategies.

A good business plan will corporate sub-plans for marketing, sales , operations, financial management, and HR and can be seen as a roadmap to achieve annual goals, targets, and objectives.

Now let’s consider the detailed subplans that support the business plan.

Operational Planning

Operational Plans are needed to ensure that your business runs efficiently and smoothly from day to day. Such a plan will cover specific procedures and processes to meet short-term, specified goals; and should help with coordinating activities across different departments in your business.

Successful manufacturing companies will certainly have robust operational plans, covering production requirements, scheduled machinery maintenance, and SOPs/quality control processes to ensure quality compliance.

Another example is where retail stores use operational planning to manage stock, schedule staff, and launch promotional campaigns.

Financial Planning

Financial Plans are absolutely essential for the financial well-being and sustainability of your business – not to mention a good night’s sleep!

They are needed to support your strategic and operational goals, and involve managing financial resources, budgeting, forecasting, cash flow analysis, debtor management, foreign exchange policy and management, controlling expenses, funding requirements and strategy, financial ratios and metrics, financial risk analysis and to ensure ongoing liquidity.

In previous CEO roles I have found that it is a very important for financial teams to be working closely with fellow managers during February and March – a time when we would be looking to maximize Year End results and develop the business plan for the forthcoming financial year commencing 1st April. It was key to ensure that we had an appropriate financial plan and particularly a robust budget to support the intended strategy and activity moving forward. May I suggest that annual budgeting is far more than simply putting a 10% figure on the previous year!

Marketing Planning

Marketing Plans are really important to help you:

·         Build brand awareness and drive sales.

·         Identify and validate target markets.

·         Understand customer needs.

·         Position with appropriate strategies.

·         Promote your products or services.

·         Reach target customers through effective distribution channels.

Marketing Plans are likely to cover a mix of traditional strategies – e.g., trade show attendance and face to face meetings with key customers and influencers – plus digital marketing strategies involving campaigns. Both may be relevant depending upon your market offering.

Talking about digital marketing, an example of a marketing plan may be an e-commerce business that develops a plan for the holiday season with emphasis on social media campaigns, direct email campaigns and influencer support.

HR Planning

This  is another key part of your business, recognizing that people are often our most important asset.

HR planning involves forecasting staffing needs (typically with “GAP” type analysis), progressing recruitment strategies that sufficiently differentiate in today’s competitive market, developing a progressive culture, and managing employee development plans and retention.

Are Business Owners Sufficiently Serious  About Planning?

Ok, many of you do recognise the importance of planning. However there are many owners and managers out there that do not allocate sufficient time and resource, and unfortunately too often suffer the consequences.

I strongly believe that without good planning, a company is likely to face many hurdles , both seen and unseen. And yes it may survive and meander on, but life may be stressful, overwhelming and full of missed opportunity.

So where do you sit?

Reasons for insufficient time/effort

The following reasons/excuses come to mind:

Operational pressures – there are just too many hats to juggle and wear, leaving limited time for ‘working on the business’.

Limited expertise – you may well know your product or service inside out but you may not be so comfortable in the areas of strategic planning and shy away from it.

Short term focus- planning on your business may be pushed to the back burner, a nice to have, and regarded as not essential in the face of more pressing short-term activity like finalising sales orders which are there for the taking and needed for cash flow, attending an industry show, or a series of customer visits.

Resources – you may be tight on cash and management and think that external advisors may be overly expensive.

Perceived complexity - the thought of entering into a strategic planning session may be daunting.

Complacency – perhaps you believe that your business is performing well, so why rock the boat? Congratulations on the current success, but be mindful that there is a danger of ‘complacency creep’ and having to face nasty surprises downstream.

While I can relate to some of the above, I firmly believe that there needs to be a shift to fully embrace the importance of planning.

As an aside I would welcome discussion with any business owners or managers who may wish to talk further on how I can help.

Consequences of inadequate planning

Now let’s not lose sight of the downside of not treating this subject seriously.

Missed opportunities – you may regret having missed opportunities in emerging markets or new product lines.

Missed efficiencies – having worked through a planning process, you may well have identified operational efficiencies. In particular, clear goals and strategies may drive a more optimal use of employees.

Inability to adapt - you may be caught with your pants down with changes in the environment, new technologies, economic swings or a change in your customers desires and needs. A decent planning process would likely pick up on these risks.

Financial instability - I have previously mentioned the importance of aligning financial requirements with proposed strategies and activity in a business plan. Failure to have a financial plan, and resultant ‘knee-jerk’ financial management often leads to financial pain. For example having to react to unforeseen events like covering unexpected costs of overseas visits, unbudgeted marketing campaigns, or staff recruitment to fill an urgent gap.

Employee disengagement - the lack of planning and communicate in your proposed direction, goals and activity, can lead to your employees being demotivated and nervous about the future and where they stand. Ultimately you risk losing your staff, dare I say to the competition.

Loss of competitive edge -benchmark companies treat planning seriously, and if you do not act then you risk losing ground to more forward thinking competitors.

Tips/Recommendations

On a more positive vein, let me offer you some tips:

1. Prioritize Planning - firmly grasp that planning is not a luxury but a necessity! So, allocate quality time for planning activities . I have previously mentioned that February /March has been a time when companies that I have run have focused on maximizing the current Year results and pulling together plans and budgets for the year ahead.

2. Invest in Training and Education – if you lack expertise in this field, seriously look at investing in upskilling (workshops, webinars, short courses etc) and consider external support from an experienced business coach or consultant in your sector.

3. Team Involvement – it is absolutely essential for the team to be involved/have a say - if you are concerned about employee alignment, inclusiveness, ownership and commitment.

4. Establish Clear Objectives and KPIs – your plans should focus on SMART objectives (specific, measurable, achievable, relevant, time bound) and include KPIs to monitor progress and spark a change in approach if needed.

5. Stay Attuned with Regular Market Analysis - keep your ‘finger on the pulse’ with regular market /competitor analysis. Use SWOT tools to assess Strengths, Weaknesses, Opportunities, and Threats. Then look to leverage your strengths and plug those weaknesses.

6. Focus on and Reward Innovation -  budget for and invest in R&D to keep your competition at bay and maximize validated market opportunity Encourage a culture of innovation where “no idea is a bad idea’ from your employees.

7. Embrace a Long-term Perspective – a year flies by quickly! So look to the future, push the boundaries.

8. Utilize Technology and Tools -  there’s a whole raft of technologies available to streamline planning processes.

Other Considerations

Before I wrap up let’s quickly touch on a few other considerations:

Risk Management

Your planning needs to provide for risk assessment and risk management policies. For example (and based upon my experience), a Risk Management Report is an important agenda item at a board meeting. Any decent plan needs to include a “worse case” scenario and the , the “what ifs” - highlighting possible risks to the business, the likelihood of them happening, the likely impact, and what mitigating action could be taken.

Sustainability

Sustainable practices need to be considered in your planning to improve brand reputation, attract socially-conscious customers, and quite frankly to “do the right thing’.

Continuous Improvement

Your plans need to provide for regular review, based on a mindset of continuous improvement and using KPIs as a yardstick.

Conclusion

To sum up, thorough planning is a critical foundation for any SME business. By embracing and taking action on this topic you are far better equipped to overcome challenges, pick up on opportunities, and achieve your goals. In this fast-changing world, the flipside can be horrendously painful.

Finally, remember that planning is not a one-off. It requires commitment (planning to plan!), flexibility, a culture of continuous improvement, and leadership.

Should you need to explore further, please reach out.

END.