Strategic planning for SMEs – 3 steps to business success

Strategic Business Planning

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A strategic plan helps you focus on where your business is going; always important, but even more so during a cost of living crisis! Start looking to the future and what you want to achieve today and you will soon be seeing the benefits to your business.

Step 1: Where To Start?

Give yourself time away from the office (whether at home or work) to think about where your company is headed, where you want to take your company and how you’ll get there. Try to sit somewhere different to where you are working currently; perhaps you could sit in the garden, take a break in a local café or maybe go for a walk? Even sitting in a different part of the house may unlock some ideas for business success! The important thing is to set time aside to plan and stick to it.

If you have a management team, investors or work closely with other members of staff, you may want to include them in this discussion. However, you may decide to map a framework out yourself first before sharing your thoughts with others.

Things to consider:

Where is your business now?

Consider how it operates, its profitability and competition. What do you do well? Where are areas for improvement?

Where do you want to take it?

Create a company vision for business success and set out your objectives for the next 5 to 10 years. To do this you need to know your why and your values. What gets you out of bed in the morning?

What do you need to do to get there?

Take account of any changes needed and how you will do that. Does your structure need to change to achieve your vision of business success? Will you need more staff? Will you need help with financing?

It’s important to set targets if you want to make changes.

Hit Your Targets In 3 Easy Steps

It’s always crucial to have a target – to know where you want to get to – and to know when you’ve got there. It’s even more important when you have uncertainty, which of course we all have at the moment. When you have your targets, it’s even more important that you hit your targets.

To be certain that you are setting realistic targets, you need to be able to forecast accurately.

To be able to hit your targets, you first need to make sure that your targets are the right ones for you. This can be done in 3 easy steps:

1. Be Specific

Define your target as specifically as possible. For example, ‘to increase sales by 5% over the next 12 months’; rather than ‘to increase sales’. Being specific will focus your mind and give you a clear goal to aim for. Also, all of your team will have clarity in what they need to achieve.

2. Be Realistic

It’s no use setting a goal that is not achievable with your existing capacity. You want your goal to challenge you but not to mean that you’ll fall at the first hurdle!

Of course, the target can be reached and then exceeded once an investment in extra capacity has been made.

3. Focus On All Departments

Your target may be outcome-based, such as an increase in sales or profits, or operational, such as improving the quality of your products. To achieve a target, then attention must be paid to the whole production process – from production to delivery.

Planning To Hit Your Targets

Once you have your target, then you will need to set a budget to hit your targets.

Here are some tips from my online course – Finance for Non-Financial People – on how to budget:

  • State any assumptions
  • Use last year’s figures as a guide but take account of any sales campaigns you are planning this year which will impact on the figures or any online sales
  • Create realistic budgets – don’t overestimate income or underestimate costs
  • Monitor the key drivers of your business – such as sales, costs and working capital
  • Involve the right people – don’t work on the budget in isolation; ask staff with financial responsibilities to provide you with estimates of figures for your budget, e.g. sales targets, production costs. If you can’t get this information, then use your best guesstimate.
  • Review regularly
  • And one from my book – Use your figures to prepare your budget for success, using the table outlined in ‘Your Business Your Numbers’.

The steps you need to take:

  1. Decide on the period of the budget – usually 12 months (see below) – it can be from whenever you choose, say 1/5/20 or 1/4/20. The starting date will depend on your year end.
  2. Gather all your income information together.
  3. Gather all your costs information together.
  4. Enter the above income and expenditure into your budget on a monthly basis.

Tips to budget successfully

Of course, when setting a budget for your business, it is always a good idea to think of ways in which you can reduce your expenditure, which you can then use to achieve your targets. Jot some down now but options to cut and manage costs should always be in the forefront of your mind throughout the year.

Here are just a few suggestions:

  1. Use accounting software and regularly enter your information on to it so you have up to date figures.
  2. Always keep a strict eye on your costs and ensure there is a genuine business reason for every purchase.
  3. Assess your cash flow each week.
  4. Buy from suppliers who offer the best value – not always the cheapest.
  5. Check you’re not paying too much for costs such as telephone, insurance, and utilities.
  6. Review your costs to identify if there are any savings that can be made. Look for unused subscriptions, excess office expenses and any duplications in services you can stop without affecting your business efficiency.
  7. Lease don’t buy. This will mean you have the newest and most efficient equipment without having to use a lot of cash to acquire it. Also, the lessor will often cover repairs and maintenance as part of their agreement.
  8. Ask suppliers for extended payment terms. Many suppliers will increase their terms from 30 to 60 days for loyal customers.
  9. Become more efficient. If you can decrease the amount of time to produce a product or deliver a service, you will improve both your bottom line and your cash flow.
  10. Consider taking out a loan. It is a decision that needs to be made after careful thought. It will protect your short-term cash flow but will need to be repaid in the future.

After each quarter end, you can review your figures and make sure that any problems are addressed. Future quarters can be adjusted depending on the actuals of the previous quarter. This helps you to set realistic goals and will enable you to hit your targets.

You will feel so much better when you take control and make a start on planning for the future. Visit my site to download my free 11-step action plan to get organised and plan ahead so you can hit your targets.

Also think about the following and their impact on your targets:

  • Should you employ your spouse?
  • Would using accounting software make your business more efficient?
  • Do you need help to reach your targets? Who or what would help you?

Step 2: Review

Now you know where you are wanting to go, it is time to map out your current situation and your business processes and finances. You will have done some review work in the previous step, but now it is time to consider your business processes in a bit more detail.

Things to consider:

Cost control

Think about any extra future costs and how you can control them.

Cash control

Ensure that you keep in regular contact with your existing customers. Can they afford to pay your invoices on time or do they need to go to staged payments?

When taking on new customers, make sure your onboarding system has good credit checks in place.

Review of business processes and business finances

Things to consider:

Equipment 

Do you have the correct equipment for your job? Is your computer fast enough?  Do you need a new printer/scanner?  If you are working from home in the future, do you need to redesign your office space or even build an office?

Time wasters

Are there areas of your system that waste time but you don’t feel that you can dedicate the time to sort them out?  It will be time well spent if you do it! Consider it an investment in achieving business success.

Help needed

Do you need to ask for help when looking at your systems?  Maybe admin or marketing don’t come naturally to you? Remember asking for help is a skill not a fault. 

Accounting system

Many of you will already be using accounting software but if you’re not and this has been an intention for ages, take action now.  Maybe even pass over your bookkeeping and free up your time to focus on your business?  Several of my clients do this and can see a big difference in their business efficiency.

Also are you using all the accounting system’s features?

Knowledge

Are there any gaps in your knowledge that are slowing your processes down?  Is it time to book on some training courses?

Step 3: Planning for Business Success

Involve the right people with the right experience.  You will need people who are analytical but also creative. Remember to ask opinions of key employees, accountants, board members, etc. Their opinions will make a big difference to the successful implementation of the plan.

People involved in the process should know what is expected of them. Give people the opportunity to arrange meetings so that they can brainstorm ideas. However, be clear from the outset about how much you will be able to take on their thoughts and suggestions.

Things to consider:

  • SWOT analysis – looking at internal and external drivers for strengths, weaknesses, opportunities and threats.
  • Vision statement – where do you want your business to be in 5-10 years’ time?
  • Major goals – what will you achieve by when?
  • Key actions – be as specific as you can.
  • Resources required – what will you require to achieve your goals? e.g. staff, finances, time.

Why plan for business success?

  • Gives you more focus on where your company is heading.
  • Reduces the risks to your business.
  • Using Key Performance Indicators (KPIs) will help you to stay on track with your progress.
  • Identifies any financing needed.

And, of course, it helps you build a successful business.

A robust plan will help you to visualise where you want your business to be and will help you to recognise the steps you need to take to get there. It takes away some of the stress which arises from uncertainty. Also, you are much more likely to achieve your goals and business success. You will feel more in control of your own destiny – and that has to be a good thing!

Anna Goodwin @2024 All Rights Reserved.

https://www.annagoodwinaccountancy.co.uk