Heraclitus, Greek philosopher, said “Change is the only constant in life.” ~ 500 BC
Peter Drucker, whose writings contributed to the philosophical and practical foundations of modern business management, said “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”
How can then business owners manage and secure the sustainability, growth, and profitability of their businesses in a competitive, ever-changing and unstable economic arena? How can a business survive a Covid-19, or a GFC or any other adverse market disruptions?
STRATEGIC PLANNING
Helps businesses to adapt and get ready for tomorrow
Gives business owners direction
Creates a measure for success
Increases business adaptability
Drives business decisions
Myth
Business strategy is for large corporates. It’s a high cost long fancy document with complex jargon. I’m a small-medium business and I do not have the time nor resources to engage big town consultants.
Reality
All businesses, regardless of size or structure, need a plan, a vision, and a strategy. By putting a strategy and business plan in place, you ensure that your business builds, maintains, and continually strengthens its specific identity in the marketplace.
Characteristics of a successful plan
A business plan and a strategic plan must be short, specific, easy to understand and follow, realistic, practical, measurable, and not open-ended.
A good organisational plan helps your business set priorities. It defines success and shows you what activities you should put first (and second, and third) in order to move your business toward that goal. Strategies reflect the business’s strengths, vulnerabilities, resources, and opportunities.
One of the best ways to start creating an organizational strategy is to thoroughly examine your current position, procedures, and work out your goals. Once you grasped a good understanding, you subsequently need to design your roadmap.
What should entrepreneurs be aware of when creating business strategy and plans in the 21st century?
In working with our clients, we begin with a focus on the highest-level objective in the business: increasing owner value. Then we move to the generic business strategy, which aims to earn, sustain, and grow profit. We centre on:
- Financial Strategy: Once you’ve set a plan for your business, we consider the numbers to see if your plan will provide the desired financial results.
- At a basic level, a business must set a budget (which sets out the financial goals) and a forecast (which tracks the financial outcomes).
- Plan to increase the business Gross Profit & Margin, Operating Profit & Margin, EBIT & EBITDA, and Return on invested capital
- A better understanding of risk to return correlation
- Improving capital structure, source & cost of financing, and working capital
- Improving cost, without determent to the profitability & growth
- Better cash flow and liquidity management
- Effective tax planning
- Business value enhancement
- Succession planning and exit strategy
- Efficient FP&A (Financial Planning & Analysis) processes in your business help organizations align to realize strategic goals
- Operational Performance Strategy, which helps businesses:
- Improve Cost (being efficient and productive), Quality (being right), Speed (being fast), Dependability (being on time), and Flexibility (being able to change)
- Improve and streamlining all internal business processes
- Enhance ability to measure performances
- Keep up with the latest trends in your industry
- Better manage and mitigate risk
- Business Growth Strategy, which looks at:
- Understanding the business Margin of Safety and plan to improve it
- Appropriate and most tax-effective structures
- Effective organisational structure
- Increasing customer demand and thereby increasing sales revenues
- Maintaining a solid customer retention rate.
- Strong Competitive Position Strategy, which helps businesses:
- Increase market share and position
- Attain a higher competitive win rate
- Create leading brand awareness
By failing to prepare, you are preparing to fail
Benjamin Franklin
A clearly written business strategy provides business owners and their management a combination of proactive actions, for the purpose of enhancing their market position and overall financial and operational performance.
More so, an easy-to-follow strategic plan will keep your business on track throughout any expected or unforeseen developments and market changes that may affect your business.
By Gregory Atamian – JJN Associates Accountants Tax Advisors
The content and the references made in this article are correct as at the publication date and are for general information and should not be relied upon as advice. If you wish to seek particular advice, call us on 02 9997 4000.