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 and
responsibilities 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.
----------------------------------------------------
Tom Wheelwright is not only the founder and CEO of
Provision, but he is the creative force behind Provision
Wealth Strategists. In addition to his management
responsibilities, Tom likes to coach clients on wealth,
business, and tax strategies. Along with his frequent
seminars on these strategies, Tom is an adjunct professor
in the Masters of Tax program at Arizona State University.
For more information please visit
http://www.provisionwealth.com
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