In the preceding blogs, I have given you the framework for setting your business’ direction over the long term and clearly defining your Mission-Vision-Values. Now we actually move into the strategic planning phase. Numerous books and articles abound on the topic, many of which make it sound a complicated and difficult process. I am a big fan of keeping things simple, practical and easily explainable.
Let’s start with the simple over-riding notion that you are in business to make money, whilst adhering to the values outlined in your Values Statement. Given that, there are three simple primary strategic objectives all businesses will have, whether they are start-up, existing businesses, manufacturers or service businesses.
- Return on Investment (ROI)
Taking each in turn, let’s start with cash. It is common knowledge that good businesses can go broke because they simply run out of money. They can be profitable but still not have the cash flow to survive. Ensuring you have cash for now and for the future is the lifeblood of your business survival.
Secondly, you need to make profits. A sustainable business needs to generate profits; they are a key indicator as to how your business is performing. Profits generally convert into cash and so is a good lead indicator that you will have the cash to prosper (but not always).
Thirdly, you need to be making a return on your investment (ROI) to reflect the risk you are taking. Larger businesses often use a target of between 10% and 15% ROI as their benchmark. Why is this important? If you can’t make a return on your business investment, you might as well put your money in the bank and earn some stress free bank interest.
If you think of these three things as your primary strategic objectives, everything you do, all the priorities you set and all the plans and decisions you make should be linked to achieving and improving these 3 inter-related strategic objectives.
You might also have some additional key strategic objectives to add that matter to you. These might be noted in your vision statement and may encompass an Environmental objective, a People Development objective or a Succession Planning or business exit objectives? This is where brainstorming with your team is invaluable.
So this week reflect on the three primary financial strategic objectives. Identify where you are currently and quantify these three measures, then decide on some broad targets for each of the three objectives. Consider which other key strategic objectives you also want to focus in on.
Next week we will start looking at devising the strategic plans to work toward these strategic objectives.