by Tom Wheelwright
http://www.provisionwealth.com
©
2008
Over the years, I have met and worked with literally
hundreds of business owners. At one time or another, many of them have written
a business plan. But very few of them have a working business strategy. A business
plan and a business strategy are two very different tools. A business plan normally
is prepared for a financing partner, either a bank or an investor. The purpose
of the plan is to let investors know about the business and its potential for
success in order to encourage them to invest in the business.
A
business strategy is quite different. Rather than a document for investors, this
is a plan for the owner to follow. It begins with an evaluation of the business'
goals. Where does the business owner want the business to be in 5, 10 or 20 years,
both in terms of fair market value and cash flow? What are the plans for exiting
the business? Will it be sold to an outside party or to key employees, or will
it be turned over to the owner's children?
Next, we have
to do a thorough evaluation of the current state of the business. This includes
a valuation of the business and an evaluation of the business' strengths and weaknesses.
The more thorough the evaluation, the better the potential outcome, but even a
cursory evaluation is helpful.
Most businesses have a tendency
to identify strengths and weaknesses solely from input from top management. The
approach needs to be broader than this to get a true assessment. A broader approach
includes interviews with key personnel and surveys of all staff levels. A side
benefit of the interviews and surveys is it provides significant insight into
the opportunities of the business.
Also included in the
evaluation should be benchmarking. Benchmarking identifies areas in which a business
is above or below the industry averages. This analysis can immediately identify
areas of opportunity.
Now we need to create a strategic
plan to overcome the business' weaknesses and to use its strengths to create the
desired value and cash flow. The valuation is key to this process. Most businesses
never have a valuation done until they are ready to sell or gift the business.
This makes no sense. If we want to target a specific value in the future, wouldn't
we want to know the current value and the method of valuation that is used in
our market? By doing a current valuation, we can develop a plan that will use
the principals of value in the valuation to build the value of the business.
Once
we have a conceptual strategic plan, we need to determine those tactics that are
likely to achieve that plan. "Strategy" is most often defined as an
elaborate and systematic plan of action intended to accomplish a specific goal
or goals, while the "tactics" are the actionable steps that will carry
out the strategy. Having a well thought-out strategy keeps the company focused
and on target while implementing and tracking a list of actionable tactics ensures
real results.
Tactics are the specific tools you will use
to carry out your strategy. Your tactics will need to adjust to the conditions
of the market. For example, your strategy may include multiple locations. Your
initial tactic may be to acquire other businesses like yours in strategic locations.
But you may find that there are not qualified or motivated sellers in your targeted
locations. You may have to change tactics and build your own office in your desired
location.
With tactics tentatively in place, it's time to
begin implementing your business strategy. This includes building your team, developing
your reports, creating your systems and procedures and putting in place internal
controls. When building your team, be sure to have clear agreements in place with
each team member regarding their roles andresponsibilities towards you and your
business. Clear communication is essential to implementing a successful business
strategy.
Be sure that the reporting is set up to give you
the information you need to make sure everything is implemented and running smoothly.
Good reporting relieves much of the stress of running a business because you know
what is happening and why it is happening.
Good reporting
is also part of good internal controls. You must have internal controls in place,
not only to prevent fraud and theft, but also to ensure that the work is being
done in the way you expect.
Creating workable and efficient
systems and procedures allow you to run the business by managing systems rather
than managing individuals. With proper systems in place, you can build your business
as large as you want while maintaining efficiency and high levels of profitability.
